Comment 14 for bug 31126

This was fixed in Ubuntu 8.04 (sorry we didn't follow up on this bug before now):

initramfs-tools (0.85eubuntu24) hardy; urgency=low

  * Implement the initramfs-tools part of the initramfs error handling spec
  * update-initramfs:
    - Make a hard link to the original initramfs image, rather than moving
      it out of the way.
    - Create a new initramfs image to ${initramfs}.new, to ensure we still
      have a functional initramfs in case of failure. The original initramfs
      only gets replaced when a new image is successfully created.
  * scripts/functions:
    - Added add_mountroot_fail_hook function to allow scripts in
      init-premount to register a hook to allow extra information
      to be given to the user, in the event of a non-existant root
      device.
    - The panic function now runs any registered mountroot fail hooks that
      were previously registered, and only does so when passed the -r
      argument from the calling function.
  * scripts/local: Call the panic function with -r to run any registered
    mountroot fail hooks when a root device cannot be found.

 -- Luke Yelavich <email address hidden> Tue, 05 Feb 2008 13:38:51 +1100

Removing old kernels is still outstanding, but is expected to be handled by way of system-cleaner (or whatever it gets renamed to).