David, sounds like a different issue to me. I didn't have any issues
during the upgrade itself and changing the grub boot line from "ro" to
"rw" makes no difference (I had to do this anyway in order to create the
/etc/init/sulogin.conf file).

I've used /sbin/init now and I think I briefly saw "bash" starting
before mountall became active. Mountall seems to hang at the same point
and the keyboard is unresponsive so I can't do the "ps" command. I left
the system in the sulogin prompt before doing anything for a while and
than it doesn't hang. I then started to hit "enter" every couple of
minutes and the system kept responding. However if I have to type a lot
or if I start mountall, it seems to hang.

-- 
Karmic hangs during boot
https://bugs.launchpad.net/bugs/450253
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