First few lines of the crash report:

java.lang.IllegalStateException: failed to create a child event loop at io.netty.util.concurrent.MultithreadEventExecutorGroup.<init>(MultithreadEventExecutorGroup.java:68)
at io.netty.channel.MultithreadEventLoopGroup.<init>(MultithreadEventLoopGroup.java:49)

What I expected to happen was...:
The game should've started fine and loaded saved worlds fine, as it did before it updated. I made no changes between updates. Nephew was playing previous version fine, game tries to update, something happened, crashes on world load every time, every world; even creating new worlds.

What actually happened was...:
The game starts, everything looks fine, the menus open, the sound works, it displays all my saved worlds when i click single player, but when I try to load any or create a new world, it gets to 'building terrain' then crashes.

Steps to Reproduce:
1. Start Launcher
2. Click Play button
3. Click Single Player
4. Attempt to load a saved world OR create a new world
5. Game gets to 'building terrain' then crashes

Additional Notes:
I have searched for about a week for an answer as to what is causing this bug. It seems that either not many other people are experiencing the same issue, as there doesn't seem to be many search results, or they are and just aren't posting/reporting it.

Most of the results suggested:

1. "your firewall is blocking java/the launcher/minecraft" - the firewall has been turned completely off to test this, it's not the firewall.

2. "your anti-virus is blocking java/the launcher/minecraft" - at first I added an exception for java, the launcher and minecraft. Secondly, I completely disabled the anti-virus; it's not the anti-virus.

3. "your java is out of date" - I updated to Java 1.8_65, tested, didn't work, same issue. Tried Java 1.8._65, didn't work.

4a. "try deleting everything (except saves folder) in '.minecraft' folder" - Did this, allowed the launcher to attempt to update/reinstall from scratch. Didn't work. Was using launcher version 1.6.45, figured the launcher would update itself if there were a newer version of the launcher. It didn't update itself; and minecraft still had the same bug as before.

4b. Retried 4. Difference being that I manually downloaded the newest launcher version and used the Minecraft.msi to install. Found out that it came with its own bundled version of java, version 1.8.0_25. Same problem as before.

5. "have you tried updating your video drivers?" - .... They're up to date.

6. "have you tried updating windows?" - ... It's up to date.

7. "are there any launcher arguments that could be causing this?" - Clicked edit profile on the launcher window to check, and there were some, more than I personally have ever added:

-Xmx1G -XX:+UseConcMarkSweepGC -XX:+CMSIncrementalMode -XX:-UseAdaptiveSizePolicy -Xmn128M

I've only ever used the argument to add 1 gig of ram. -Xmx1G

Removed all but the -Xmx1G argument, still crashes on 'building terrain'.

8. ''have you tried running the launcher in 'administrator mode'" - Yes, no effect same bug.

9. "have you tried running the launcher using an older version of java?" - Yes, I tried running it with Java 7. Didn't work, same error.

10. "have you tried running older version of minecraft?" - Yes, same error for all of them. The last working version before I allowed minecraft to attempt to update itself was 1.8.6. Now even that won't work.

https://xkcd.com/979/