vmbuilder should generate a proper /etc/mtab file in the disk image / chroot 
before running grub.
For some reason grub requires that /etc/mtab contains the root partition in the 
mtab list.

embedded mode for grub fails since vmbuilder makes partitions starting
from sector 1. virt-manager starts from sector 63.

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https://bugs.launchpad.net/bugs/610652

Title:
  vmbuilder randomly fails to install grub

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