Well, I think this looks good, but I'm going to be very specific (and unfortunately long winded) to be sure my testing meets your needs. If I did anything wrong I'll be glad to repeat the testing.

I began by installing Karmic on sdb3, maybe my labels will help:

lance@lance-desktop:~$ sudo blkid
/dev/sda1: LABEL="Maverick" UUID="b7a0df33-53e4-4f0d-856b-0da92ff0d743" SEC_TYPE="ext2" TYPE="ext3" 
/dev/sda2: LABEL="Karmic" UUID="1332b9d0-cf18-4299-9094-12acbdac91ad" TYPE="ext3" 
/dev/sda3: LABEL="Lucid" UUID="d252929b-949d-432e-a18c-18f9ae770d28" SEC_TYPE="ext2" TYPE="ext3" 
/dev/sda5: LABEL="Backups" UUID="594c3d40-2791-4c0a-8644-d9812545da2d" TYPE="ext3" 
/dev/sda6: LABEL="Pictures" UUID="8a3f6c83-cb52-4caf-96b8-5faf2c830453" TYPE="ext3" 
/dev/sda7: LABEL="Downloads" UUID="05289ee4-d681-4806-b6fd-aefd784f9323" TYPE="ext3" 
/dev/sda8: LABEL="Documents" UUID="571cfad8-68c7-4703-883e-c0baa2a381d4" TYPE="ext3" 
/dev/sda9: UUID="80627269-1ccd-4774-b4ea-a5ef8824ffaa" TYPE="swap" 
/dev/sda10: LABEL="Isadora" UUID="f223fe5d-3acb-4d96-950c-62661ad8714b" SEC_TYPE="ext2" TYPE="ext3" 
/dev/sda11: LABEL="Squeeze" UUID="0eec2831-7805-437e-a06e-e18ab3268e6a" SEC_TYPE="ext2" TYPE="ext3" 
/dev/sda12: UUID="f6062e12-09f1-4f19-b6c2-ad58812d6794" SEC_TYPE="ext2" TYPE="ext3" 
/dev/sdb1: LABEL="Not used" UUID="e5b97883-9431-477e-bc71-a68db5c07cba" TYPE="ext2" 
/dev/sdb3: LABEL="This test case" UUID="5f555613-01f8-4c98-acc3-ca123cd81b06" TYPE="ext4" 
/dev/sdb5: UUID="8d9402a0-29a4-44c1-ab74-94e268865e8f" TYPE="swap" 
/dev/sdb6: LABEL="Maverick" UUID="4ac10d96-7aea-44f4-a69e-5dfa2a992b44" TYPE="ext4" 

You can see that everything is Debian/Ubuntu based. Does that matter? I can do this on a computer with Windows on one drive if needed.

While installing this Karmic I allowed it to install grub to /dev/sda since that's default (the /dev/sdb MBR was assigned to the Maverick on /dev/sdb6), then just after installation I ran the following command:

lance@lance-desktop:~$ echo SET grub-pc/install_devices /dev/sda | sudo debconf-communicate
0 value set
lance@lance-desktop:~$ 

Then I upgraded to Lucid. I did not first apply the Karmic updates!

When confronted with "configure grub-pc" I chose to install the maintainers version, then I got the typical screen asking where to install grub and only /dev/sda was checked. I unchecked it and went to the screen where it says, "Continue without installing grub?", and I left the box unchecked which took me back to the previous screen with no boxes checked. I finally chose to install to /dev/sda (where it originally was) and continued.

When prompted to restart I did so, rebooted successfully, then ran:

lance@lance-desktop:~$ echo SET grub-pc/install_devices /dev/hda | sudo debconf-communicate
[sudo] password for lance: 
0 value set
lance@lance-desktop:~$ 

Then I upgraded grub-pc & grub-common from proposed. I was then confronted with the new behavior (showing only /dev/sda, /dev/sdb, and /dev/sdb3 as possible locations) The info: "The GRUB boot loader was previously installed to a disk that is no longer present ..." appears only with a "mouse-over" in notify-osd or if you click on Help so it's possible that warning could be missed, but that's  a "notify-osd thing" I'd think.

Choosing to continue without installing grub results in the expected loop until you either choose to install to a device or agree to not install as I think it should.

Please let me know if I goofed and need to repeat the test with modifications, also feel free to contact me anytime you think my testing might be useful.