OK.
I am pretty sure I have the same problem as Tim.
"It just loops finding the casper-rw device 5 times"

I spent quite some time testing both manual fixes and different version of 
initrd.gz.
I finally realized that I could read the casper.log with one of 5 unix commands 
I remember from University (more).
In the log I have 5 attempts to mount. Nothing else.

I not 100% sure but I think this was with the xubuntu  initrd attached
here. If that's correct the pendrive version went on about cannot find
CD or something like that.

Does another bug report exists for this problem?

-- 
[hardy] livecd: keyword "persistent" results in busybox and (initramfs)
https://bugs.launchpad.net/bugs/219192
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