More info:
This is on my own Xen testing machine (custom built 4.01, with an Ubuntu 10.04 dom0 with custom built 2.6.32-40 pvops dom0 kernel and pvgrub domUs), not a production Linode instance
But this was the only place I found anyone having the same trouble with 2.6.32-32-virtual (actually it uses the generic-pae kernel on 32bit).
The Ubuntu EC2 kernel though still works fine, even though I get a serious sounding pvgrub error message:
Code:
root (hd0)
Filesystem type is ext2fs, using whole disk
kernel /boot/vmlinuz-2.6.32-316-ec2 root=/dev/xvda1 ro xencons=hvc0 quiet splash
initrd /boot/initrd.img-2.6.32-316-ec2
ERROR Invalid kernel: xc_dom_probe_bzimage_kernel: kernel is not a bzImage
xc_dom_bzimageloader.c:350: panic: xc_dom_probe_bzimage_kernel: kernel is not a bzImage
The Ubuntu 2.6.32-33-virtual kernel in lucid-proposed looks like it has some buggy upstream patches that were included in 2.6.32-32 reverted. I suspect the EC2 kernel was released on a different schedule and doesn't (currently at least) have the bad code included.
I'm chalking it up to regressions that have already been fixed - just not fully released yet.