Hi, this bug affecting me on Trusty too. I've found a workaround solution here:
http://askubuntu.com/questions/819844/kvm-vmbuilder-fails

patch /usr/lib/python2.7/dist-packages/VMBuilder/plugins/ubuntu/dapper.py<<EOT
@@ -72,7 +72,7 @@
             self.call_hook('fix_ownership', manifest)

     def update(self):
-        self.run_in_target('apt-get', '-y', '--force-yes', 'dist-upgrade',
+        self.run_in_target('apt-get', '-y', '--force-yes', 
'--option=Dpkg::Options::=--force-confnew', 'dist-upgrade',
                            env={ 'DEBIAN_FRONTEND' : 'noninteractive' })

     def install_authorized_keys(self):
EOT
Or edit it manually and add --option=Dpkg::Options::=--force-confnew' option.

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https://bugs.launchpad.net/bugs/1618899

Title:
  vmbuilder fails with dist-upgrade with release xenial

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