I can replicate when doing virt-install using 
"http://archive.ubuntu.com/ubuntu/dists/xenial-updates/main/installer-amd64/"; 
as --location.
I can confirm that adding "d-i base-installer/kernel/image string 
linux-image-4.4.0-142-generic" to the preseed is a workaround for the time 
being.

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https://bugs.launchpad.net/bugs/1820366

Title:
  network install of xenial 16.04 fails with linux-generic package error

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