Try the following (it's what's helped me when that happens... and it does tend to happen a lot, unfortunately).
1) Enter Airplane mode while 'downloading' the update and wait for the error (because you don't have a network connection anymore). Clear it out, make sure the download progress bar is not in your notifications and then turn Airplan mode off. Retry download.
2) Reboot. Retry download. (sometimes after this, download begins automatically)
3) Power off. Power on. Retry download.
4) Locate the market in your App Manager and clear cache. It should take a little while to re-populate after that but it may help.