I can verify this bug is present, and will affect anyone upgrading from
a instance originally booted with cloud-init older than 0.6.1-0ubuntu6
*and* a natty kernel on EC2.  Bug 752361 fixed the issue in newly booted
instances.

I tested the following scenarios
A.) started with natty image older than 2011-04-06 (as the bug opener did)
    In this scenario, I see a prompt for /etc/default/grub changes.  I
    selected to accept the maintainer's version.
    Then, I was propmted because grub was installed to a disk no longer present.
    It showed a list of devices (xvda1).  I did not select this and hit 
'continue'.  Then I said 
   that grub should continue without installing.  (This is OK as grub is not 
managed inside
   EC2 instances).  That seemed to work fine.

    I also believe that selecting xvda1 in the list would have *also*
worked.  but I did not try that yet.

    I did not see how to get into an endless loop as the opener
described.

B.) started with natty image newer than 2011-04-06
    I was shown /etc/default/grub modification prompt.  That was all.
C.) started with maverick image and do-release-upgrade [-d] to natty.
    In this scenario, the upgrade should go OK.  The user would then reboot
    into the natty kernel, and /dev/sda1 would be renamed to /dev/xvda1.  The
    next time grub-pc is upgraded, the user may be prompted to address the
    missing /dev/sda1.  Selecting /dev/xvda1 or selecting to go on without
    installing should be OK.

In A and B above, you're shown a prompt for merging /etc/default/grub, and 
should accept the maintainers version.  The differences are either a bug in 
grub-pc not recognizing older versions of its file, or newer modifications done 
in the image build process so that user will see a prompt (with a timeout) on 
first boot of the images.
In C above, you're shown the prompt, this is bug 759545.

The relevant cloud-init code can be see at [1]
--
[1] 
http://bazaar.launchpad.net/%7Ecloud-init-dev/cloud-init/trunk/annotate/head%3A/cloudinit/CloudConfig/cc_grub_dpkg.py


** Changed in: grub2 (Ubuntu)
   Importance: Undecided => Medium

** Changed in: grub2 (Ubuntu)
       Status: New => Confirmed

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https://bugs.launchpad.net/bugs/751057

Title:
  grub-pc upgrade on Amazon EC2: The GRUB boot loader was previously
  installed to a disk that is no longer present, or whose unique
  identifier has changed for some reason.

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