There is an incompatibility between the tar versions used in the beta and the packaging of the updates. This is why the update packages are not working (tar.gz ones, shell scripts work fine).
1.After noticing the updates would not apply I pushed the tarball via adb on device / and tried to apply manualy via adb. Result: "tar: short read" (command used: tar zxvf cm_o2_update.tar.gz)
2.Pushed uncompressed tar via adb and tried to extract. Result: "tar: short read" (command used: tar zxvf cm_o2_update.tar)
3.Mounted ext4 partition on latest Oneiric livecd VM and tried to extract both uncompressed and compressed tarballs. Both resulted in:" tar: a lone zero block at ##" (did not note down block number because it wasn't important).
Error 3 refers to incompatibility between version of tar. Error 1 and 2 refer to bug in busybox possibly related to incompatibility between versions of tar.
WORKAROUND: Extract via nautilus and copy manually (I can't provide tutorial for file operations under linux..)
Also Android Market updates are not working. No notifications for new versions (including market app)
App2SD fix is working.
Edited by Nodens, 03 December 2011 - 01:40 PM.