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When you enable the Eclipse option "scan for automatic updates" and a new Mylar release is available, then the automatic update scanner of Eclipse only finds an update of the Mylar task list (M3) and no updates of the rest of the components (still M2). After restarting Eclipse with the new installed task list, mylar reports errors, since the new task list is not compatible with the rest of the M2 (of course). Then you can force a manual update and suddenly the remaining components are available for update (M3). I also noticed this behavior when updating from M1 to M2. Seems to be only if you use the automatic update and not the manual one, the manual always offers you all components in the right version.
Yes, this is really annoying. The good news is that for Eclipse 3.3 this Update manager should be fixed, and updates post Mylar 2.0M3 should work using "Search for updates..". Out of curiosity, what errors did you see in the log? *** This bug has been marked as a duplicate of bug 132450 ***