Have you been able to upload new KB from Shavlik since you did the Upgrade to 12.7.1? Was this upgrade 2 steps (12.7.0) and then the Patch to 12.7.1?
Just trying to understand when this process broke... I would suggest putting in a ticket as time is ticking and devices need to be patched...
Are there any entries in the Master Server (Patch Manager) immediately following the placement of these XML files that reveal that the application tried to parse the files but failed?
You mean CAB files...?
Could it be that you are working according to this workaround:
The right WA (for 12.6 + 12+7):
If you had previously installed version 12.6, my statement is superfluous... because you already know how it works...