Actually that will prevent it from downloading at all without your permission - it doesn't actually force it to ask for permission to restart once you have allowed the update and it has finally completed that much.
There is a registry setting to prevent update-forced restarts. This allows you to leave auto-update on w/o the fear of a forced restart after it completes...
If you have W7 Pro or Ult you can run the group policy editor (gpedit.msc).
- On the left find "Computer Configuration > Administrative Templates > Windows Components > Windows Update".
- On the right, double-click "No auto-restart with logged on users for scheduled automatic updates installations" and, in the properties window, "Enable" it. Click OK.
If you have starter or home you need to run the registry editor (regedit.exe) and make the changes manually. (As with all registry changes this should be done by someone very comfortable with messing with W7 innards and it is recommended you back up your registry first - I am not responsible if you FUBAR your system ... and even if you blame me, good luck finding me

)
- Locate "HKEY_LOCAL_MACHINE\Software\Policies\Microsoft\Windows".
- Highlight "Windows" on the left and then right-click, create New ... Key called "WindowsUpdate" if it does not exist (no quotes, no space, capitalized as shown)
- Now Highlight WindowsUpdate and right-click, create New ... Key called "AU" (no quotes, capital letters)
- Highlight AU and on the right side, right-click and create New ... DWORD "NoAutoRebootWithLoggedOnUsers" (No quotes, no spaces, Caps as shown) with a value of 1.