I can confirm the problem with the jaunty live daily desktop cd (april
14, 2009) and persistence.  I just used usb-creator to create bootable
usb stick of latest jaunty and during boot it goes to busybox and
initramfs.  However, if I press F6 during boot and remove "persistent"
from kernel boot command line then it will boot OK.

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[jaunty alpha 6+ daily] usb-creator creates incorrect free, persistent space; 
to /cdrom not /
https://bugs.launchpad.net/bugs/346700
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