This has been fixed with 12.10 and a SRU for 12.04 landed today.

To apply the fix, simply put:
"GRUB_RECORDFAIL_TIMEOUT=5" in /etc/default/grub 
And then run: "update-grub"


** Changed in: grub2 (Ubuntu)
       Status: Confirmed => Fix Released

** Changed in: grub2 (Ubuntu)
    Milestone: None => ubuntu-12.10

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https://bugs.launchpad.net/bugs/797544

Title:
  grub2 waits forever for keystroke before booting default OS.  headless
  server. hang.

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