This error "Verification of file signature failed for file:" when the file is successfully transferred to the ~\UpdateServicesPackages file share is typically caused because:
- The WSUS Signing Certificate has not been created
- The WSUS Signing Certificate has not been distributed to the Patch Manager server(s).
Start by running the Server Publishing Verification Wizard (from the Software Publishing node) to validate that the certs have been properly created and distributed.
That did the trick. Packages now publish successfully.