Comment 2 for bug 384289

This looks to be a duplicate of bug 269539 so I am marking it as such. Please continue to track this issue at that report. The following if an excerpt from you DpkgTerminalLog.txt file:

A new version of /boot/grub/menu.lst is available, but the
version installed currently has been locally modified.

  1. install the package maintainer's version
  2. keep the local version currently installed
  3. show the differences between the versions
  4. show a side-by-side difference between the versions
  5. show a 3-way difference between available versions
  6. do a 3-way merge between available versions (experimental)
  7. start a new shell to examine the situation

What would you like to do about menu.lst? 6

Merging changes into the new version

 Conflicts found! Please edit `/var/run/grub/menu.lst' and sort them out manually.
 The file `/var/run/grub/menu.lst.ucf-new' has a record of the failed merge of the configuration file.

User postinst hook script [/usr/sbin/update-grub] exited with value 3
dpkg: error processing linux-image-2.6.30-8-generic (--configure):
 subprocess post-installation script returned error exit status 3