Comment 59 for bug 653134

OK I have the permanent fix for 10.10.... Probably works on 10.04.1 too.

First back up /boot/grub
sudo cp -r /boot/grub /boot/grubbackup

Then delete all the stuff in /boot/grub that isn't supposed to be there (everything added after fresh wubi install)
 cd /boot/grub
sudo rm *.mod
sudo rm *.img
sudo rm *.lst
sudo rm *.o
sudo rm *.pf2
sudo rm -rf locale

This leaves 2 files:
bcbc@ubuntu:/boot/grub$ ls
grub.cfg grubenv

Update the grub.cfg automatically:
sudo update-grub

FIXED!

Not done yet - prevent grub updates from breaking it again:
Go to Synatpic, select packages grub-pc and grub-common, click on Package, Lock Version

For the developers, these are the differences between /boot/grub/ and /usr/lib/grub/i386-pc/ which probably indicate the problem areas --- the locale directory for one.
bcbc@ubuntu:/boot/grub$ diff -r /usr/lib/grub/i386-pc/ /boot/grubbeforetest/
Only in /usr/lib/grub/i386-pc/: build_env.mk
Only in /usr/lib/grub/i386-pc/: config.h
Only in /usr/lib/grub/i386-pc/: g2hdr.bin
Only in /usr/lib/grub/i386-pc/: g2ldr.mbr
Only in /boot/grubbeforetest/: grub.cfg
Only in /boot/grubbeforetest/: grubenv
Only in /usr/lib/grub/i386-pc/: grub_script.tab.h
Only in /boot/grubbeforetest/: locale
Only in /boot/grubbeforetest/: unicode.pf2