Clicking "Update All" a second time, after dismissing the error dialog, works all the time for me (or at least almost all the time).
I just eliminated all of the duplicate files in the mobile apps folder - that did not help.
However, regarding the similar problem with different error message in iTunes 9: someone else reported that removing old app files corresponding to apps no longer in the iTunes store fixed the problem.
That DID fix the problem for me for a while - I found a couple of obsolete apps, deleted them, and the problem went away for a couple of months at least. But, it eventually came back, I presumed because another app had become obsolete.
I haven't tested this theory again, as I have a lot of apps, and I haven't discovered an easy way to find obsolete apps. Last time, someone had posted a list of obsolete apps they'd found, which included all of the ones I had - that made it easy for me. If you sort by date (in the Finder), and then look for the very old apps in iTunes, that's a good way to find some, but doesn't guarantee you've found all of them.
If anyone tries this, please
- let us know your results, and
- post any obsolete apps you find
Finally, ditto on what has been said earlier:
If you have this problem, please file a complaint at
http://www.apple.com/feedback/