Update: The latest update for CyanogenMod for Milestone – version 126.96.36.199 solves this problem as well.
Lately I’ve been having problems updating software on my Motorola Milestone (1, as in A853) running CyanogenMod 7.1 (thanks to Nadalbak who maintains an unofficial and unsupported port of CyanogenMod for this old device). When I start the Android Market and do an update of an existing application, I get the error “Package file is invalid” for any application. Sometimes removing an application and reinstalling it will work, but often not.
There could be several problems that cause this, apparently a problem with the file permissions on the file systems is common, and if this is your problem then it can be fixed by opening the terminal emulator, executing “su” to gain super-user permissions and then running “fix_permissions” (it will take a while to complete).
If this doesn’t solve the problem for you, then likely the problem is that you ran out of space on your “data” partition or “cache” partition. This is very common if you have a large “apps partition” on your SD card and you are in the habit of installing tons of applications – I know I am 🙂 .