I've committed a fix for this in Debian.
** Changed in: grub-installer (Ubuntu)
Status: New => Fix Committed
** Changed in: grub-installer (Ubuntu)
Assignee: (unassigned) => Colin Watson (cjwatson)
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karmic alpha: text mode installer uses LILO instead of Grub 2 for /boot on LVM
https://bugs.launchpad.net/bugs/393432
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