It certainly looks like update-grub ran succe8sfully:
Generating grub.cfg ...
Found linux image: /boot/vmlinuz-3.7.0-3-generic
Found initrd image: /boot/initrd.img-3.7.0-3-generic
Found linux image: /boot/vmlinuz-3.5.0-18-generic
Found initrd image: /boot/initrd.img-3.5.0-18-generic
Found memtest86+ image: /boot/memtest86+.bin
done
The dmesg from the first reboot after upgrade and /boot/grub/menu.lst
would be helpful here.
** Changed in: update-manager (Ubuntu)
Status: New => Incomplete
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https://bugs.launchpad.net/bugs/1081721
Title:
quantal to raring upgrade: do-release-upgrade fails to install the new
kernel
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