Ok been working on this issue and I have discovered the following:
The kernel param "noreplace-paravirt" is not needed and makes no difference 
when used.

However the "vga=7xx" option is needed. It basically tells grub to set
that VESA mode, and the kernel to then use that mode that was set by
grub.

This is where the problems start:
The vesafb module is blacklisted by default in Lucid (server and desktop), so 
it will never load or make use of the VESA mode that was set by grub. However 
the s3fb module is included in the desktop dist. So even though we're 
requesting VESA with the "vga=7xx" option, it will instead load and use the 
s3fb module when using desktop, and that works. On server however it falls back 
to using the vga16fb driver. This driver doesn't work and just produces a 
garbled console.

Is there a kernel param that could force the kernel to load the vesafb
module even though it's blacklisted?

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Unable to install lucid lynx 10.04 in Virtual PC virtual Machine
https://bugs.launchpad.net/bugs/556744
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