The error above suggests you might be using an applicationupdater.swc/swf that does not know about the 2.5 update namespace. If you are updating from an application already deployed with AIR 2.5 or later, you may be including the wrong version of the update framework in your project. Try getting the application updater swc from the AIR 2.5 or 2.6 runtime, and using that.
If you already have an application out there, deployed with AIR 2.0 or earlier, which you want to update, you should follow the steps in this guide.
I am having the same problem as simon_lucas although my config is slightly different:
FlashBuilder 4 with SDK 4.6, Current app is with SDK 2.5.
Trying to update with SDK 3.2, I double-checked per Horia Olaru that I do use the application updater swc:
<path-element>D:\Program Files\Adobe\Adobe Flash Builder 4.6\sdks\4.6.0 - Air 3.2\frameworks\libs\air\applicationupdater.swc</path-element>
<path-element>D:\Program Files\Adobe\Adobe Flash Builder 4.6\sdks\4.6.0 - Air 3.2\frameworks\libs\air\applicationupdater_ui.swc</path-element>
But I still have the 16815 error.
If I change the update.xml to be <update xmlns="http://ns.adobe.com/air/framework/update/description/2.5">
instead of <update xmlns="http://ns.adobe.com/air/framework/update/description/3.2">, I am proposed to download the new app and then I get an error 16824.
You have to use the descriptor namespace 2.5. And make sure that the versionNumber contains a value higher than the previous version of your application, else, update will not work.
Can you share the contents of your update descriptor(full) and your new app's application descriptor here(only the versionNumber,id and namespace elements of the application descriptor will do).