It just happened to me. ACER Ferrari 3400 laptop, an old one running
8.04 before. I decided to install everything anew, just Ubuntu, no other
OS on the hard drive. I ended up editing /usr/lib/grub/grub-mkconfig_lib
as suggested in this thread to fix the problem.

This is a really annoying bug with karmic. And I agree, why not give
this bug a high priority? In fact, I just noticed that it hasn't even
been assigned to anyone yet!

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Grub 2 problem, error: no such device
https://bugs.launchpad.net/bugs/403408
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