I got the above error when using webupdate.
The web server was Microsoft IIS 6.0 with a virtual directory.
My server manifest file was "productname.ini"

For this to work, I had to had a MIME type for ".ini" files.

From within the IIS manager:
- select the virtual directory "liveupdate",
- right-click and choose properties.
- change to "HTTP Headers" tab
- click on "MIME Types" button
- click on "New ..." button
- enter the following:
Extension .ini
MIME Type INI file
- and press OK

WebUpate now works correctly - yeah!!!

Regards,
Alan Telford
Development Manager
Maxtel Software Ltd
http://www.maxtelsoftware.com