The idea to first do a kernel upgrade from etch was a good one.
I went back to etch, and did an upgrade to 2.6.18-686
Seems to have gone well.
Linux alpha 2.6.18-6-686 #1 SMP Sat Dec 27 09:31:05 UTC 2008 i686 GNU/Linux
I then followed the process on:
http://www.howtoforge.com/
how-to-upgrade-a-debian-etch-system-server-and-desktop-to-debian-lenny
And it seems to have gone well. With the pre-upgrade to etch kernel apt now works, and the updates seem good.
The lenny upgrade was big! And then I did the dist-upgrade, which was also big.
The one thing that seems not-quite right to me is that you said that Lenny is 2.6.26, my uname reports: 2.6.18-6-686.
Apt upgrade, dist-upgrade, and updates all thing that everything is stable and fine. Why is the kernel not the right version? Should I try a manual apt install of the newer kernel?
Thanks for the insight and good hint!
Too bad that apt got/gets so confused, and can break things!