Comment 5 for bug 712659

ok i think i have cracked this after hours of headaches! - so its all about lack of aes support for mounting loop devices - maybe crept in with new kernel - all you need to do is add loop-aes-utils and the installer will work - i will build a new iso now on buiilder to triple check this and close the bug

you can just aptitude install loop-aes-utils from the live version and then run ubiquity and you should be good to go!