Dylan, you have to load the kernel modules, which is what Eric is looking for.  
The karmic OS AMI might be
"2.6.31" but the Amazon Kernel Image (AKI) is 2.6.27-13.  This bug is the 
effort to make the AKI and the AMI 
be the same version of the OS and have the correct modules so the loop driver 
(and others) can be added.

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Karmic EC2 images don't use a karmic kernel
https://bugs.launchpad.net/bugs/418130
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