Joseph,
  Sorry, but obviously this is during an upgrade the previous kernel was 
3.2.0-9-generic-pae.

I eventually got it installed and working, I think this may have
something to do with the inotify does not work on unionfs bug.  However
crypsetup seams to have it's own problems.

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https://bugs.launchpad.net/bugs/940765

Title:
  error processing linux-image-3.2.0-17-generic-pae

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