Confirmed on: 
Linux ubuntu 2.6.38-8-generic #42-Ubuntu SMP  x86_64 x86_64 x86_64 GNU/Linux

The fix above (remove html from /var/lib/apt/lists/) worked for me.

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https://bugs.launchpad.net/bugs/346386

Title:
  Update fails with invalid package files with "Encountered a section
  with no Package: header"

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