There seem to be several people in the ubuntu forums with that problem.
I have a similar one (probably related):

I've build a custom 2.6.22 (standard gutsy kernel). First without initrd 
support, which worked with 2.6.20. But it didn't compile. So I enabled initrd 
support and removed the initramdisk line from the grub config, otherwise I have 
the above mentioned problem (busybox...).
Don't know if this helps.

-- 
Final Gusty throws me in to BusyBox on all attempts to install
https://bugs.launchpad.net/bugs/153991
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