Same work around works for me it seems, well I removed (or - moved) the old
/boot/grub/menu.lst
and then run grub - by reinstalling linux-image-... package,
and then it worked.
** Changed in: grub (Ubuntu)
Status: New => Confirmed
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Does not update menu.lst even though it says it does
https://bugs.launchpad.net/bugs/470490
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