android:installlocation="auto",installation - Error when set android:installLocation="preferExternal...

It appears Android is a little buggy in this respect, and does not handle all possible cases correctly.

I had a similar, but more complicated problem. The solution is basically to delete the appropriate file in /sdcard/.android_secure/... See also:

My own problem involved two android devices. One app was installed on device#1 (Android 2.2), then I mounted device#1 onto device#2 (an Android 4.0.3). Then I installed the same app on device#2. Guess what, it installed onto the SD card of device#1, overwriting the install on device#1. The app did not work on device#2 after unmounting device#1. The app did still work on device#1. I uninstalled it on device#2, no errors, but could not re-install it (I got the error "Failed to create secure container smdl2tmp1").

My solution was to uninstall the app on device#1, then re-mount it onto device#2, then installing it on device#2 worked. Then I moved the app from SD card to internal memory.