Thanks for this additional information.
I close the bugreport now, there is a open bugreport that u-m should
handle unreachable archive better and display a better error message.
This will get fixed for the next release :)
** Changed in: update-manager (Ubuntu)
Status: Needs Info => Rejected
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Update from Ubuntu 6.10 to 7.04 not initialize
https://bugs.launchpad.net/bugs/109683
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