This is fixed with the upload of grub 0.97-11ubuntu13. There were two places were update-grub still wrote to stdout, confusing debconf and make the postinst fail.
** Changed in: grub (Ubuntu)
Status: In Progress => Fix Released
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xubuntu dapper 6.06 to edgy 6.10 dist-upgrade failed (kernel postinst failure)
https://launchpad.net/bugs/63074
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