Yes, I can confirm that on my system the problem is with update-initramfs.
After kernel installation, update-initramfs is invoked via /etc/kernel/postinst.d/initramfs-tools. However, initrd.img is not created. In fact, update-initramfs seems to do nothing.
Running update-initramfs manually via:
$ sudo update-initramfs -c -t -k 3.2.0-21-generic -v
Produces no output.
also produces no output. Not even the usage as in 10.04 LTS.
However, I am able to use /usr/sbin/update-initramfs from my working 10.04 LTS partition to generate the initrd.img images. So, it looks like a problem with update-initramfs
$ sudo apt-get clean
$ sudo apt-get autoclean
$ sudo apt-get --reinstall install initramfs-tools
but this did not seem to change anything.