I also have this problem with a karmic 32bit guest in KVM.

It correctly boots once every 10-20 boot-ups, sounds like something
isn't waiting long enough for something else to come available, leaving
it working over to 'luck'.

currently running: 2.6.31-18-generic-pae #55-Ubuntu as installed by 
linux-image-virtual (yes, its a virtual machine)
The root filesystem is placed on an encrypted lvm volume inside the kvm, the 
host does not have an encrypted fs.
The init exec error appears after i've unlocked the lvm with my password.

Now installing the non PAE kernel (strange that the linux-image-virtual
installs a kernel with the postfix -pae from a package ending with
-virtual, this will cause conflicts and dpkg errors at install time of
the -pae package, been there)

Rebooting

Helas, still barfing the error (see screendump)



** Attachment added: "CRASH_linux-image-2.6.31-18-generic.png"
   
http://launchpadlibrarian.net/37965988/CRASH_linux-image-2.6.31-18-generic.png

-- 
Fresh Install of Karmic, Boot ends with Kernel Panic 
https://bugs.launchpad.net/bugs/477050
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