Thanks for your report.
The relevant error is
---
Setting up linux-image-2.6.32-17-generic (2.6.32-17.26) ...
Running depmod.
update-initramfs: Generating /boot/initrd.img-2.6.32-17-generic
Running postinst hook script /usr/sbin/update-grub.
/etc/default/grub: 9: radeon.modeset=1: not found
User postinst hook script [/usr/sbin/update-grub] exited with value 127
dpkg: error processing linux-image-2.6.32-17-generic (--configure):
subprocess installed post-installation script returned error exit status 127
This is due to a syntax error in the config file /etc/default/grub.
Please correct it or if you don't know what to do attach the file
/etc/default/grub to this report. Thanks in advance.
** Changed in: grub2 (Ubuntu)
Status: New => Incomplete
** Summary changed:
- package linux-image-2.6.32-17-generic 2.6.32-17.26 failed to install/upgrade:
subprocess installed post-installation script returned error exit status 127
+ /etc/default/grub: 9: radeon.modeset=1: not found
--
/etc/default/grub: 9: radeon.modeset=1: not found
https://bugs.launchpad.net/bugs/550130
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