I guess this won't help very many people, but if you're encountering
this in VirtualBox like I do you can get passed the update if you have a
backup of your image.

Paul Brown wrote that he thinks that grub setup wants to open a
terminal-like window. Thank you for that comment. Because of that I
tried doing "sudo apt-get upgrade" in a terminal window instead of using
the software updater. And as he had predicted, after a while I got a
window looking similar to the traditional Linux installation gui where I
got to choose which harddrive or partition to put grub on, I chose one
and then the update completed. I just rebooted and seems to work fine.

Of course this doesn't solve the problem for anyone who gets it on a
"real" computer and/or without backup, but I thought it worth mentioning
here for people using VirtualBox.

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https://bugs.launchpad.net/bugs/1351404

Title:
  Installing updates freezes while setting up grub-pc

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