Comment 48 for bug 477104

A few more observations:

I mentioned that running "grub-install" modifies c:\wubildr and deposits a tons of files into /boot/grub on the linux side.
The files are being copied from /usr/lib/grub/i386-pc. I have no idea why they're being copied, as a stock install does not locate these files in /boot/grub. Despite this copying, grub.cfg, etc., are undisturbed, and update-grub properly updates grub.cfg.

The earlier poster is misleading, since update-grub and update-grub2 are identical. update-grub2 simply calls update-grub, so any differences are entirely his imagination.

Another earlier poster did a "insmod ntfs" in grub because that's how update-grub creates the grub.cfg. All automatically generated grub.cfg files have "insmod ntfs" in them from a template. This is even in the stock grub.cfg from a fresh install, and works fine. Nothing to do with the problem.

I agree with previous poster that perhaps grub is having a problem reading ext4? While the root filesystem is in fact ext4 mounted over loopback, "root" in grub identifies it as "ext2", which is wrong. Could this be related? And a reminder that any files modified from stock install become unreadable by grub (they read as garbage).

But worse still, why is it that ubuntu chose to use an obviously broken beta version of grub2 in a production version of their OS? That's completely irresponsible. It obviously hasn't been sufficiently tested, and that fact is now wasting everyone's time.