new real fix WITHOUT losing data or re-booting!!!
I just added this to another forum in a thread about this same error. If you have a jailbroken iPhone or iPod Touch at firmware 2.2, this will likely work for you. Hints inside may help with other jailbroken firmware versions.
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Okay, I'm a bit excited here, but trying not to get ahead of myself. I had this same error on an update to one of my cracked apps that I had double-clicked into iTunes. Then I got notified of updates to several of my free apps, and each of them also would not install the update with the same error.
Yes, the workaround mentioned in a Google search, of unchecking the app from your Applications list, syncing, re-checking and syncing again, does work, with the well-known and obvious side-effect of losing all the data for that app. So instead, I was going to set aside a few hours tomorrow to follow nlsmiley's steps above. Really, if you think back to the first 2.0 jailbreaks, the instructions always said to download a free app before any cracked ones. Hey, back then there weren't that many cracked ones yet, so this was easy to remember and do. So these instructions made a lot of sense, and I expected them to solve my problem.
Just for grins, though, I installed "2.2 MobileInstallation Patch" from Cydia (in Steffwiz's repo). It noted that I had apparently already patched the MobileInstallation file, as I had, since I installed it during my 2.2 jailbreak, then it said something about overwriting it anyway? Little type, hard to see, but whatever. I then "bought" a free app (the fabulous new Crossbones) and downloaded and installed it with a regular sync. The sync process proceeded to try to install the up-to-then failed updates (both free and for my cracked app), and seemed to be taking longer to do so. Ya know, kinda like it was really doing it this time! Lo and behold, after the sync finished, NO ERRORS! Just to be sure I turned right around and sync'd again, and it did not try to install anything. My apps are all updated! Woo-hoo!
EDIT: NO REBOOT INVOLVED! My son's iPod Touch at 2.2 had, like mine, been throwing these same errors as updates accumulated lately. We just did the same procedure with his, and it worked again. I have to wonder if just SFTP'ing into the Touch, and copying the cracked MobileInstallation file over the old one again, followed by the free app first process, would work as well. But that's for others with more time on their hands than me to try. Does the Patch installation process work any other magic inside the Touch that a simply overwrite of the file would not?
Now hey, it's just one guy here, and who knows if it's permanent, but my apps ARE updated and I did NOT lose my data doing it. Try it and report back here if it works for you too...
Hopefully this little discovery will run true, and save a bunch of us a bunch of pain. I DO know that from now on I am installing a free app FIRST, EVERY time I upgrade to a new jailbroken firmware version!