After more debugging and digging I have found the bug to because I am
using grub2 on this host as grub1 doesnt play nice with the cutting edge
dell machines in our lab, and our lab deployment software (another
story).

What I have done is extract the grub binary from the deb package and
modified /usr/lib/python2.5/site-
packages/VMBuilder/plugins/ubuntu/distro.py to point to my manually
extracted grub executable.

If I can get some time I will try and make the VMBuilder play nice with
grub2, but it appears grub2 lacks any sort of --batch functionality.

-- 
vmbuilder failes in Cleanup stage (jaunty and intrepid)
https://bugs.launchpad.net/bugs/329458
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