There’s a new repair command for that particular issue, but I have no idea why you would hit it so soon on a fresh install. Are you using the HassOS based images for your board or are you installing some alternative way?
I have indeed been installing the HassOS based image. I believe the 32 bit version for the Raspberry Pi 3B+. I would use balenaEtcher to flash hassos_rpi3-2.12.img.gz onto my SD card, remove and reinsert it in order to save a CONFIG/network/my-network on there, and then took the SD card and put it into the Pi and plugged it in. I was always able to ping the device, and sometimes I got the “Processing” screen, but never a successful install.
Anyway, the good news is that I was finally able to make progress! After having tried pretty much every else before going back to Hassbian, I decided to make one last attempt by swapping out power supplies again. Although I’d tried multiple USB chargers (and successfully run on one of them for months), I went ahead and got a fast charger and plugged into that. Sure enough, my install was successful and I’m finally able to turn on/off my bathroom lights again!
I was completely stable when running Linux, no restarts or reboots like when I’ve run off an inadequate charger in the past; given this experience though, I suspect that Docker is extra sensitive to any power delivery issues. It could have just been a fluke, but if anyone else is experiencing issues with readlink /mnt/data/docker/overlay2/l: invalid argument, make sure you are using a quality 2.5A USB charger. I’ve also plugged my device into a UPS so hopefully I won’t get corrupted by a brief power outage either.
What command is that? I have the same problem after updating but it only appears sometimes. I’m at version 0.98.5
Sorry for the late reply…very busy week. The command is hassio su repair
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I am on HA 0.97.2 and I don’t think I have the repair command. Is there a way for me to get past the error?
Edit: Fixed as follows:
hassio ha update --version=0.98.5 (worked)
hassio su update --version=186 (failed)
Reboot the entire thing
hassio su repair (worked)
hassio ha update (worked)
Now I am all up and running!
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This happened to me again (3rd or 4th time?) and I limped along with sporadic freezes and reboots and no updates for several months. I broke down and ordered a fancy new “high endurance” card. The day it was to be delivered, I was tinkering and tried the update a few times and it worked. It’s been running fine ever since. I still haven’t set up the new card, but I do take regular backups when I’m making changes.
I just got caught up with this thread and will be saving this one for next time…
So, you could procrastinate and then order a new card and see what happens 
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This saved me a bunch of time. Thanks for sharing!
turned it on and off again facepalm
The command typed at the CLI is hassio> su repair you don’t put in the hassio you just type in "su repair " etc…
Same issue here when moving from 0.99.3. Running the repair command worked for me.
Thank you, this worked for me!!
Same issue here with a brand new card with a brand new 3.8 Hassio downloaded 1/24/2020 because I couldn’t upgrade my previous version. Ran su repair with no success. Between emulated Hue issues and now this, I am losing a lot of faith in HA.
“Same issue” needs more clarification. Updating from what version?
I was running Home Assistant 0.98.4 and wanted upgrade my addons (configurator, MQTT, Samba, etc.). The updates would fail with the Server 500 error. I then tried to upgradefrom .98.4 to 0.104.3. This also received the 500 errors. So I got a new card and did a new install of 0.104.3. Any attempt to do an upgrade or install any add-ons, caused the server 500 error.
Pi-Hole anywhere? Have you checked using hassio dns logs or hassio dns info on your instance?
@cogneato - I did figured out what my new install failed to install add-ons. Pilot Error
On my router I had bound an old Pi to the IP address I tried to use for the new Pi. I never did figure out why I could not upgrade my old .98 install that had another IP address and I had been able to do upgrades in the past. I will focus on the new install and use this from now on. Thank you for working with me.
I had the same issues with fresh install of latest hassos_rpi3-3.8.img.gz. Most commands failed with dial tcp 172.30.32.2:80: connection refused and hassos-supervisor logged 500 Server Error: Internal Server Error ("readlink /mnt/data/docker/overlay2/l: invalid argument").
After reformatting and flashing with balenaEtcher a few times I noticed that systemctl status hassos-supervisor reported wrong start dates. The date command always gave the correct date time but the systemctl status said hassos-supervisor was running since 2018. Not sure what that was about or if it is related but it made me restart the supervisors. It then showed the correct start date and the frontend was suddenly reachable.
So basically I did systemctl stop hassos-supervisor and then systemctl start hassos-supervisor and it worked.
For me stopping all demons and then update through the UI has worked.