This site offers a workaround by installing a different kernel.
http://tombuntu.com/index.php/2007/09/05/making-ubuntu-server-work-in-virtualbox/

In short:
After booting from cd, select rescue a broken system then execute a shell from 
the root partition and execute the following
apt-get update
apt-get install linux-386
apt-get remove linux-server

worked for me

-- 
Panic: CPU too old (after installing Gutsy i386 server) 
https://bugs.launchpad.net/bugs/126863
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