I just had a similar problem today and got around it without a reinstall. Same situation created the problem: doing a software update, restarting, seeing Setup Assistant and continually looping.
After a couple of unsuccessful tries, I decided to start up in Safe Mode (hold down Shift key immediately after the startup tone, and release when you see the progress indicator (looks like a spinning gear)). That brought up my account icon (which still existed) and allowed me to log in. However, after logging in, the Setup Assistant came on again, with the same loop. This time, though, I could back out and get back to the account log in screen. Once there, I selected Restart (on the login screen, not on the Apple menu), and the restart got me back to normal.
Things I tried that did not work:
1) In the Setup Assistant, select "Do not transfer any files at this time" (the result was the loop described above)
2) In the Setup Assistant, select "Transfer files from a Time Machine backup" (the system froze and no backup was done)
3) Selecting Restart or Shut Down from the Apple menu (nothing happened)
Hope this helps