I've been trying this on and off for over a week now and have had no luck. I've even tried it on multiple roms.
I install the after using the following commands I'm not able to install any apps whatsoever from either the market or any backup app (Astro, TI Backup, Backup Pro):
pm setInstallLocation 2
- resetting the location back to 1, 0
- force closing the market and then dumping the cache and data
- battery pull
When I try installing from the market the apk downloads but is constantly showing that it is trying to install. Also, I can't move Froyo compliant apps to the SD card using the native Manage Applications setting.