More digging has found lots of people with this problem but no solutions (just some people saying time to reflash!)

But I have found one. The error was in /var/lib/dpkg/available.

To fix, open xterm, move to dpkg directory and clear available (make sure you are root first), then apt-get update.

cd /var/lib/dpkg
dpkg --clear-avail
apt-get update

Can install apps again! Hope this helps others.