I'm not sure why this says Fix Released - it is still happening for me
on a 12.10 Live USB + persistence set up.

In fact, I got it trying to apt-get install mdadm - so it seems possible
it occurs any time update-initramfs runs rather than just on a kernel
update.

I suppose it is possible that if you can get the first update done using
Colin Watson's workaround that future updates will work, but install
from the 12.10 release Desktop iso doesn't.

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https://bugs.launchpad.net/bugs/932663

Title:
  kernel upgrade failed on a USB live system created by usb-creator

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