I see the same error when installing 10.04 on USB stick. It is curious
that doing the same while using LiveCD session proceeds without any
errors. The same media, same hw.

-- 
package initramfs-tools 0.92bubuntu71 [modified: usr/sbin/update-initramfs] 
failed to install/upgrade: lzma: Encoder error: -2147467259
https://bugs.launchpad.net/bugs/562312
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