From my friend at Google: "It looks like he used the wrong account to update his credit card. He has a Google Apps account connected to his Blogger/url purchase, this is the account he needs to update in Google Wallet."
I can't suggest a better solution, but wow - it sucks at the moment.
Edit: Would it be possible to find out from the friend at Google if they are doing anything to report this anomaly to users? The author can't be the only person this happened to, and given that Google knows this, perhaps it would be useful if the error message reflected what was going on?
Perhaps fixing that error message would be a better use of resources than trying to improve support?