After another IRC conversation with Johan, I disabled : sulogin.conf,
and ran mountall under strace (after removing the daemon line).

Attached is the resulting strace.

** Attachment added: "mountall.strace"
   http://launchpadlibrarian.net/38716862/mountall.strace

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upstart fails to start system into multiuser mode
https://bugs.launchpad.net/bugs/506727
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