Further information; I can cause things to advance if I manually do:

'initctl emit filesystem'

followed by

'initctl emit net-device-up IFACE=lo'

My issue looks like it is similiar to #497299 but that is related to
karmic and not lucid as Kees Cook indicates.

(and like that bug, I do not have a file called /etc/init/network-
interface.conf - nothing seems to contain that file according to
packages.ubuntu.com).

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