Is the sd-cards size really 256MB? I sometimes forget the suffix and end up with.. something very small.
You can also always raise the sizes to like 512, 256,266 and try again to be certain it's something else.
Also, Logcat output would be nice too.
Edit: As it seems, you cant just "install" the app on the SDcard even if you have 30+Gigabyte free on it. Installation depends also on the internal memory of the phone even in 2.2.
Example: Nexus one has 512mb internal memory. The android os takes the needed ram for the camera, gpu, kernel etc leaving a user with only around 190MB app space (which will be even lower due to apps already installed etc).
HTC Hero on the other hand has only 288mb internal memory, leaving it with a very small "app size ram".
Depending on the phone, 90mb app will install to SDcard on nexus one, but won't on Hero due to memory limitations.
The reason you are getting that error is that, after the android os takes the needed ram out of those 192MB, the "app size ram" is not enough to hold that 50+mb application.
I thought that installLocation would install directly to SD, but that is not the case.
Vidar Vestnes blog confirmed what I described above by performing a test with different app sizes on his HTC Desire..
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