Hello
I have the very same problem

I have the same message as Hura (see that sceen shot)
I have  performed:
"Can you check if the problem remains after doing this:

1. Make sure you have the latest "ltsp-server" package installed on the server
2. remove /opt/ltsp/i386
3. ltsp-build-client -a i386
"
Now the thin client (hp5500) boot up every time. The complete boot-up time is 
more than 5 min. 
On the 8.04 ltsp it was less (not measured)
After receiving the IP address the thin client shows in the order as below
1)a black screen with the white ubuntu logo
2) the screen shot as that from Hura. Except : the lease time is 43200,  the  
line after the last  “terminated with satus 1” says "starting LTSP client"
3) The TC continues and boot into the loggin screen (4 minutes after  IP 
address receiving).
4) I can log inn. Then it takes again 1 minute to complete the whole process 
and before I can work on the TC.
Remark
Compiz is active on the server. The thin client has no visual effect.  
A reboot until the loggin screen takes less than a minute. Until the desktop 1 
min.

I have the impression that the TC is working slow compared by the 8.04
LTSP setup.

I hope this comments will help improving the process.

-- 
ltsp doesn't boot due to mount errors in initrd
https://bugs.launchpad.net/bugs/435228
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