Hallelujah! Success at last! The solution for the update problem and at least some of the installation problems (like angry birds rio) is as follows:
First, hook your phone to a computer with a usb cable - need to have your phone in "disk drive" mode. Open the new drive that will appear on your computer (which, of course, is actually your phone's sd card).
Next, locate the file folders named ".android_secure" (it should be near the top of the listings).
Click on and open up this ". android_secure " folder and look for a file named "smdl2tmp1.asec"
Delete it! Destroy it! Kick it out of your life! It's what is causing the problems!
Unplug your phone. Phone will say something like "preparing sd card." It could take a bit but after that you can update all the apps including those on your sd card and angry birds and download Rio hassle free.
As there a a whole bunch of threads on this issue, please pass the fix on.
Sent from my Evo - so there!