This bug was fixed in the package cloud-init - 0.7.0~bzr644-0ubuntu1

---------------
cloud-init (0.7.0~bzr644-0ubuntu1) quantal; urgency=low

  * New upstream snapshot.
    * fix cloud-archives (LP: #1044594)
    * fix set_passwords for usergroups as a list (LP: #1044553)
  * fix 'failed to setup apt-pipelining' warning on install due to
    old 0.6 style usage of cloud-init.
 -- Scott Moser <smo...@ubuntu.com>   Sat, 01 Sep 2012 20:11:34 -0400

** Changed in: cloud-init (Ubuntu)
       Status: In Progress => Fix Released

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https://bugs.launchpad.net/bugs/1044553

Title:
  'password' setting broken by usergroup changes

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