OK guys, please give the following liveCD a test
http://people.ubuntu.com/~pkl/test-gutsy-desktop-i386.iso

This has a fix for a Squashfs race condition that slipped into the code
in April.  A fix was released in May, but due to some oversight, the
Gutsy kernel code wasn't updated.

This fix makes the liveCD not hang on my tests.

-- 
gutsy livefs causes random hangs or modprobe crashes
https://bugs.launchpad.net/bugs/126964
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