Somehow the dependency files are not being set properly.
This is why I think this is so.

If I set use_tmpdir true then lyx creates a directory under /tmp where it stores
temporary
files. Over there, there is a file called nameofdocumet.tex.dep that holds the
names of the
latex files used to create the dvi. But that file points to the wrong place! It
always has the
path that points to the installation directory.

To demontrate this, turn use_tmpdir to false, then create a lyx file but make sure
you
put it in the installation directory. Now the dependencies point to the right
place and
update dvi works fine (this is probably why it works for some of you, just move
the file
outside the installation directory and it should stop working.

-Mario

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