Ok, simple case of invalid config syntax - closing the bug report.
To fix this, you should add mem=980 inside the *existing* quotes; i.e.:
GRUB_CMDLINE_LINUX_DEFAULT="quiet splash mem=980"
** Changed in: grub (Ubuntu)
Status: Incomplete => Invalid
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Error updating linux-image-2.6.31-16-generic
https://bugs.launchpad.net/bugs/492917
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