I've read the entire thread, so I know you've fixed it, but...
Anyone use Microsoft SCCM (System Center Configuration Manager) in their daily job?
Worse than that; I write code that talks to it.
But PACKAGE A has errors in the way it is distributed and it never actually installs. It also does not report back a failure
You probably should have seen something in the status messages for that advertisement. Did you look in the advertisement status node?
Beyond that, did you look in the log files on that client? They're in C:\Windows\System32\CCM\Logs. I can never remember which ones you need to look in, though.
I see that PACKAGE A is now gone from the list of advertisements on that client.
How did you verify this? Did you actually look on the client, or did you just confirm the list of advertisements for the relevant collection?
How do I make SCCM just ignore that one advertisement and go on to the next one?
Wait for a policy refresh.