Problem found and solved!

The problem is in how the drive is booted.  There is the windows style
and the standard unix style.  Perhaps someone more knowledgeable can
explain the differences.

The solution was to go into the BIOS on the Fit PC and change it from
"other" back to "windows".

Tested and confirmed working on  Server 12.04

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https://bugs.launchpad.net/bugs/1008564

Title:
  grub-pc fails to update

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