On a fresh install Karmic 64-bit this still occurs. Removing the lines
in comment #10 made the system unbootable:

ubuntu karmic 2.6.31.16
Get the error now:
error: you need to load the kernel first
press any key to continue

and for the XP partition on a seperate harddisk
error: invalid signature
press any key to continue

-- 
Grub 2 problem, error: no such device
https://bugs.launchpad.net/bugs/403408
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