I think this bug still exists. I observed a failure with similar
symptoms for kernel 2.6.28-11.36, which can be worked around by
uninstalling nvidia-common, doing the kernel upgrade, then reinstalling
nvidia-common. However, this workaround is only useful for expert users.
The consequences of the bug are very high - initramfs fails to be
regenerated and the system can be rendered unbootable (that happened to
me).

Raising the importance to critical. I think nvidia-common is a weak link
at the moment. Since it is installed for everyone, a weakness affects
everyone even if they don't have the old drivers it is setup to detect
and address.

** Changed in: nvidia-common (Ubuntu)
   Importance: Undecided => High

** Changed in: nvidia-common (Ubuntu)
       Status: Fix Released => Confirmed

-- 
linux-image-2.6.27-9-generic failed to install/upgrade : run-parts: 
/etc/kernel/postinst.d/nvidia-common exited with return code 10
https://bugs.launchpad.net/bugs/303825
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