I just ran into this very same problem on a xenU host.

To fix this I did:

mount the root partition and chroot into it.
remove 'mountall' which triggers an uninstall of 'cron' and 'upstart'.
reinstall: upstart-compat-sysv and cron from jaunty.
exit the chroot, umount the root partition
restart the xen domain.

so basically you cannot upgrade to karmic (and beyond?) if you're 
stuck on somewhat older kernels it seems.

bummer.

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karmic - mountall fails to mount filesystem on boot
https://bugs.launchpad.net/bugs/447747
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