I got the same issue with alternate CD for RC1. I posted first here:
http://ubuntuforums.org/showthread.php?t=1083783

My workaround was simple (and after rebooting I was able to install
ubuntu-desktop).

Going to tty2 (CTRL+Alt+F2) shows that /cdrom has the right stuff.
/target/cdrom points to media/cdrom which in turn points to cdrom0 (yes,
all relative to /target).

I set the /target/cdrom symlink to /target/media/cdrom0 like:
cd /target
rm cdrom
ln -s /target/media/cdrom0 cdrom

Then go back to tty1 (CTRL+Alt+F1) and click "continue". I get an error
saying that the "Install base system" step failed and I go back to tty2
(CTRL+Alt+F2), put the symlink back for /target/cdrom:

cd /target
rm cdrom
ln -s media/cdrom cdrom

And after this the Install Base System worked and the processed
continued.

This is not good -- at least it worked.

-- 
Alternate install hangs requesting jaunty CD
https://bugs.launchpad.net/bugs/351053
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