Had that problem. WiFi is MUCH faster than EDGE if you can get a network, so...
1. Select an app to download. When you select "Install" button at top right, I'll guess that a screen comes up giving options to "Install", "Clear List", or "Cancel" or maybe some variation of those... I don't remember the exact text but there will be an option to clear the download list.
2. Select to Clear the download list.
3. Go back to Home screen and Relaunch Installer.
4. Select the app again to install. Now that list should not have the option to clear the download list... because it will have been cleared!
5. Select to Install. Should be ok.
If the download doesn't proceed then go through the process again, rebooting the iPhone completely (holding down power button until red slider appears etc) instead of just relaunching Installer.
I had to do this several times but eventually it didn't block up again and I haven't seen that message for some time. Fixed as far as I can tell.