Since I upgraded to bzr 1.17 I also got this when running "bzr up"  to checkout from bzr+ssh://bazaar.launchpad.net/%7Ebzr/bzr-git/trunk/

bzr: ERROR: Cannot lock LockDir(lp-44636176:///~bzr/bzr-git/trunk/.bzr/branchlock): Transport operation not possible: readonly transport 

Whole debug log from ~/.bzr.log is

0.121  bzr arguments: [u'up']
0.208  looking for plugins in /home/tvainika/.bazaar/plugins
0.270  looking for plugins in /usr/lib/python2.5/site-packages/bzrlib/plugins
0.580  encoding stdout as sys.stdout encoding 'UTF-8'
0.670  opening working tree '/home/tvainika/src/bzr-git/trunk'
1.189  bzr-svn: using Subversion 1.6.3 ()
1.626  opening SVN RA connection to 'bzr+ssh://bazaar.launchpad.net/~bzr/bzr-git/trunk'
1.635  ssh implementation is OpenSSH
5.163  opening SVN RA connection to 'bzr+ssh://bazaar.launchpad.net/~bzr/bzr-git/trunk'
5.512  opening SVN RA connection to 'bzr+ssh://bazaar.launchpad.net/~bzr/bzr-git/trunk'
7.941  Traceback (most recent call last):
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 835, in exception_to_return_code
    return the_callable(*args, **kwargs)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 1030, in run_bzr
    ret = run(*run_argv)
  File "/usr/lib/python2.5/site-packages/bzrlib/commands.py", line 647, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/usr/lib/python2.5/site-packages/bzrlib/builtins.py", line 1409, in run
    view_info=view_info), possible_transports=possible_transports)
  File "/usr/lib/python2.5/site-packages/bzrlib/workingtree.py", line 2190, in update
    old_tip = self.branch.update(possible_transports)
  File "/usr/lib/python2.5/site-packages/bzrlib/decorators.py", line 192, in write_locked
    result = unbound(self, *args, **kwargs)
  File "/usr/lib/python2.5/site-packages/bzrlib/branch.py", line 2396, in update
    self.pull(master, overwrite=True)
  File "/usr/lib/python2.5/site-packages/bzrlib/decorators.py", line 192, in write_locked
    result = unbound(self, *args, **kwargs)
  File "/usr/lib/python2.5/site-packages/bzrlib/branch.py", line 891, in pull
    possible_transports=possible_transports, *args, **kwargs)
  File "/usr/lib/python2.5/site-packages/bzrlib/branch.py", line 3145, in pull
    master_branch.lock_write()
  File "/usr/lib/python2.5/site-packages/bzrlib/remote.py", line 2178, in lock_write
    remote_tokens = self._remote_lock_write(token)
  File "/usr/lib/python2.5/site-packages/bzrlib/remote.py", line 2169, in _remote_lock_write
    repo_token or '', **err_context)
  File "/usr/lib/python2.5/site-packages/bzrlib/remote.py", line 54, in _call
    return self._client.call(method, *args)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 129, in call
    result, protocol = self.call_expecting_body(method, *args)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 142, in call_expecting_body
    method, args, expect_response_body=True)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/client.py", line 78, in _call_and_read_response
    expect_body=expect_response_body),
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/message.py", line 306, in read_response_tuple
    _translate_error(self.args)
  File "/usr/lib/python2.5/site-packages/bzrlib/smart/message.py", line 355, in _translate_error
    raise errors.LockFailed(*error_args[:2])
LockFailed: Cannot lock LockDir(lp-44636176:///~bzr/bzr-git/trunk/.bzr/branchlock): Transport operation not possible: readonly transport 

7.941  return code 3