That error message happens on all jaunty thin client, it's normal behavior.
Though the errors just after it aren't. That error is caused by a disconnection
and lack of reconnection from the thin client, that usually happens when
something is wrong with the network controller or the network itself.
In your case, it could be a virtualbox issue.
We changed some of that stuff in Karmic, maybe you'll get a better
result with it, could you try ?
** Changed in: ltsp (Ubuntu)
Status: New => Incomplete
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LTSP 5.0 - Thin client problem with SQUASHFS
https://bugs.launchpad.net/bugs/364961
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