I encountered, isolated, and worked around this issue.

Symptom: gettys don't start in the container.  runlevel(8) reports
"unknown" instead of "N 2".

Problem: ifupdown 0.6.8ubuntu29.1 introduces this change:

    ifupdown (0.6.8ubuntu29.1) lucid-proposed; urgency=low

      * debian/ifupdown.network-interface.conf: Bring up lo manually, so
        that it
        comes up even if /etc/network/interfaces is broken (LP: #512253).
      * debian/ifupdown.upstart.if-up: Don't emit a duplicate net-device-up
        event for lo here, as network-interface.conf will have taken care of
        it.

For some reason, upstart DOES NOT generate the event, so when this
change disabled the "duplicate" event, upstart never realizes the lo
iface is up, and never enters runlevel S.

Workaround: manually generate the event immediately on boot.

    # cat /srv/lxc/template-amd64/etc/init/lxc.conf
    description "LXC vs. Upstart workarounds"
    start on startup
    task
    script
     initctl emit -n stopped JOB=udevtrigger
     initctl emit -n started JOB=udev
     # This one is needed for broken ifupdown NMU 0.6.8ubuntu29.1
     initctl emit -n net-device-up IFACE=lo LOGICAL=lo ADDRFAM=inet 
METHOD=loopback
    end script


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