Can you try running Eclipse as Admin and try this again?. Let me know how that goes.
what is the update url are you using, is this it m2eclipse.sonatype.org/sites/m2e ?
Edit:
There are incompltibilities with different vertions of Eclipse and plugins,
I suggest you to use the update site
http://download.eclipse.org/technology/m2e/milestones/1.0
OR
http://download.eclipse.org/technology/m2e/releases
The best bet is the release version, But if you are still getting the issue, try the milestone 1.