I'm getting the same error with today's update to 2.6.27-11.25 on both generic 
and server. I can't copy the error so I'll sum it up:
...
Fatal: Bios device code 0x80 is being used by two disks
      /dev/sdc (0x0820) and /dev/sda (0x0800)
Failed to create initrd image.
...

sda is my boot disk and sdc is an audio player that's always plugged in
(has never been an issue before). I did plug in another USB flash disk
during the update (not sda nor sdc) ... might that have caused an issue?

At this point, I'm concerned that a reboot might break the system since
subsequent reinstallations continue to fail (even with the extra drives
removed).

-- 
package linux-image-2.6.27-11-generic 2.6.27-11.22 failed to install/upgrade: 
subprocess post-installation script returned error exit status 2
https://bugs.launchpad.net/bugs/314643
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