I ran into this same exact issue and thermoman's workaround worked like
a charm.  All i wanted to do was manually create my partition layout
using systemrescuecd and fdisk, then install ubuntu on the partition i
had created specifically for it.  When tried to install on the selected
partition the same failure described by thermoman was encountered.  I
then spent several hours trying all types of ridiculousness before i
came across thermoman's workaround.  Went back to my original partition
setup, did the "swapoff thing" and the install worked fine.

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Installer fails to format partition
https://bugs.launchpad.net/bugs/365702
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