The issue is created by bundling the new AMI, the process is not copying the 
/dev. Booting the new instance Grub has the definition of root using LABEL=....
To fix:
 1) edit /etc/fstab updating the LABEL=... with /dev/sda1
 2) edit  /boot/grub/menu.lst doing the same
 3) run update-grub to rebuild the grub config

After that the new AMI bundled will boot correctly

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/dev/disk/by-id does not exist for virtio devices
https://bugs.launchpad.net/bugs/635096
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