Comment 2 for bug 1512347

I can confirm this bug, which means the preseed file at
https://help.ubuntu.com/16.04/installation-guide/example-preseed.txt

# Additional repositories, local[0-9] available
#d-i apt-setup/local0/repository string \
# http://local.server/ubuntu xenial main
#d-i apt-setup/local0/comment string local server
# Enable deb-src lines
#d-i apt-setup/local0/source boolean true
# URL to the public key of the local repository; you must provide a key or
# apt will complain about the unauthenticated repository and so the
# sources.list line will be left commented out
#d-i apt-setup/local0/key string http://local.server/key

Doesn't work.

If you change the line to
d-i apt-setup/local0/repository string deb http://local.server....

The install works fine

I don't think that library.sh is necessarily the cause, as the above preseed works fine in 14.04 with the same code and behaviour from library.sh (it creates a sources.list file with a missing deb on the front). I don't understand

Under 1404 the following happens

Feb 29 14:02:41 base-installer: E: Type 'http://myserver/debs' is not known on line 4 in source list /etc/apt/sources.list
Feb 29 14:02:41 base-installer: E: The list of sources could not be read.
Feb 29 14:02:41 base-installer: warning: apt update failed: 100

However base-installer progresses anyway.

The function in library.sh that deals with local0 (and not local1-9) seems to be a bit of a hack though, but for anyone running into the same problem prepending deb to your preseed file should do the trick.