I can confirm this behavior.

Hardware is the same as above, but I have a floppy drive.

I used Ubuntu 7.04 Beta Desktop CD 32 bit.

When booting from cd it trys to do something with the floppy in a loop.
After a while it stops and reports the same error as above.

It may have to do something with initramfs, because it is displayed on
screen and you can type in some commands... But I don't really know ...

-- 
[feisty] installer reports I/O error dev fd0
https://launchpad.net/bugs/97306

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