Thank you for taking the time to report this issue and help to improve
Ubuntu.
Clearly, grub *does* recognize this kernel, and has configured it for
use by default. Installing kernels directly in /boot without using the
Ubuntu packages is a supported use case; and grub quite intentionally
boots the newest kernel version it finds by default. So I don't think
there is an actionable bug here.
** Changed in: grub (Ubuntu)
Status: New => Invalid
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update-manager found 2.6.34-rc2 kernel in my /boot and put it at top of new
grub menu.lst
https://bugs.launchpad.net/bugs/567846
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