I can confirm that this still exists bug on 12.04 LTS.  I  edited
/etc/default/grub, added GRUB_GFXPAYLOAD_LINUX=text, then ran 'sudo
update-grub' to work-around the issue for now.

Some more information:
http://askubuntu.com/questions/248986/ubuntu-12-04-lts-no-longer-able-
to-boot-normally

Most importantly, this problem doesn't occur with an older kernel
(3.2.0-29-generic and below).

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https://bugs.launchpad.net/bugs/685611

Title:
  [Natty] Booting fails because of GRUB setting "set
  gfxpayload=$linux_gfx_mode"

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