> mount: could not find any free loop device
> ERROR: execution failed: "mount -o loop /mnt/fed11-irc-kernel2.6.31 
> /mnt/img-mnt"

Dylan,
   Could you please try installing the appropriate (i386 or x86_64)
linux-image deb in the instance.  At
https://edge.launchpad.net/~timg-tpi/+archive/ppa use:
  - linux-image-2.6.31-300-ec2_2.6.31-300.2_amd64.deb
  - linux-image-2.6.31-300-ec2_2.6.31-300.2_i386.deb

   Then
$ modprobe loop
   Then, re-try your re-bundle.

   The difference here is that previous ec2 kernels (and other karmic
kernels) kernels had
CONFIG_BLK_DEV_LOOP=y
this one has
CONFIG_BLK_DEV_LOOP=m

-- 
Karmic EC2 images don't use a karmic kernel
https://bugs.launchpad.net/bugs/418130
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