/usr/sbin/update-grub2 is a shell script that executes update-grub
/usr/sbin/update-grub is a shell script that executes grub-mkconfig
hence grub-mkconfig == update-grub == update-grub2
Now, as to the original error itself, I haven't a clue, yet.
Unfortunately, the grub2 documentation is scarce, but getting better, and even that documentation that does exist becomes more obsolete every time they update grub2.
I would suggest taking a look at http://www.gnu.org/software/grub/
and wading through their documentation for your error, as grub2 is currently a moving target.