My initial thoughts were that the internal memory must be full, but this turned out to not be the case. On further investigation it appears that the problem relates to the Android Market application itself. The most recent update appears to not work on Android 1.6 on the G1.
To solve this problem I reverted to a previous version of the Android Market app. To do this follow these instructions:
- Click on menu button
- Click on settings.
- Scroll down to Applications and click on it.
- Select Manage Applications
- You will see a long list of installed apps.
- Scroll down to Market and click on it
- Click on Uninstall Updates
- The Market app updates will be uninstalled
- Exit back to the home page
- Go to Android Market and it will appear like a fresh install and you will be asked to agree to the Market terms and conditions.
You should now be able to install new apps. It can take a while for the phone to synchronise all the apps to their update trees so you might find you get a lot of update notifications over the next few hours as the system detects them.