Installing cryptsetup fixed it for me too, but I don't really consider this to 
be a fix. I don't need cryptsetup, and don't like the idea that I'm loading 
something I don't need upon every boot to mask a bug. I notice this bug is 
confirmed but still unassigned. Is it considered low priority? I've just 
installed Ubuntu 10.04, but am considering wiping it out and switching to 
Debian because of this and another (login screen freeze) issue I've had since 
installing Ubuntu.
Thanks,
Brett Stahlman

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udevd inotify_add_watch no such directory error for physical volumes
https://bugs.launchpad.net/bugs/581566
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