This is an error message coming from Git.
It’s saying that you have local changes in the file management/dns_update.py. Did you ever edit that file?
Run the following command:
(cd ~/mailinabox ; git diff)
This will show you all local changes in the mailinabox directory. In theory there shouldn’t be any, but clearly there are.
To reset the mailinabox directory to the original, run this command:
(cd ~/mailinabox ; git reset --hard HEAD)
Then run the setup.sh script as before.