The fix KB3004394 was known to cause numerous problems on Windows 7 machines.
Microsoft originally pulled the fix from their servers after a couple of days of reported mayhem
and then shipped another fix (KB3024777) which actually just removed KB3004394 from
machines that already had it installed.
The KB article has been updated to reflect this
http://support.microsoft.com/kb/3004394
I haven't seen any reported problems with 8.1 but that fix is optional rather then
recommended. I would leave it off your system as it appears to causing you problems.