I can confirm that this continues in Precise with version 0.139.

Using --debug-echo, I found that running login or build generates a cowbuilder call with --override-config and --distribution specified. --override-config only seems to be sensible for the update function and --distribution for create or update function. Experimenting, I found that running the generated cowbuilder call, but leaving --override-config off, functioned correctly.

What is happening is that the cowbuilder command of the cowdancer source package doesn't copy the --distribution parameter when building the pbuilder command it forks, although it does copy --override-config. When pbuilder gets the parameters it replaces the chief distribution deb source line with one for the distribution on which the command is running. Since this doesn't match the package index built when the create function was run, packages can't be found to fill build dependencies. See below.

/etc/apt/sources.list in chroot during login (and presumably build) function:

deb http://archive.ubuntu.com/ubuntu lucid-security main restricted universe multiverse
deb http://archive.ubuntu.com/ubuntu lucid-updates main restricted universe multiverse
deb http://archive.ubuntu.com/ubuntu lucid-proposed main restricted universe multiverse
deb http://us.archive.ubuntu.com/ubuntu/ precise main restricted universe multiverse    <------***
#deb-src http://us.archive.ubuntu.com/ubuntu/ precise main restricted universe multiverse  <------

Perhaps the best approach would be for cowbuilder-dist to drop --override-config, --distribution, and --architecture for the build, login, and exec functions.

cowbuilder-dist cowbuilder command built:
sudo HOME=/home/gruber ARCH=i386 DISTRIBUTION=lucid DIST=lucid ARCHITECTURE=i386 DEB_BUILD_OPTIONS= pbuilder --login --override-config --distribution lucid --aptcache /var/cache/apt/archives  --basetgz /home/gruber/pbuilder/lucid-base.tgz --mirror http://archive.ubuntu.com/ubuntu --othermirror 'deb http://archive.ubuntu.com/ubuntu lucid-security main restricted universe multiverse|deb http://archive.ubuntu.com/ubuntu lucid-updates main restricted universe multiverse|deb http://archive.ubuntu.com/ubuntu lucid-proposed main restricted universe multiverse' --components 'main restricted universe multiverse '

cowbuilder built pbuilder command:
-> Invoking pbuilder
  forking: pbuilder login --aptcache /var/cache/apt/archives/ --override-config --othermirror deb http://archive.ubuntu.com/ubuntu lucid-security main restricted universe multiverse|deb http://archive.ubuntu.com/ubuntu lucid-updates main restricted universe multiverse|deb http://archive.ubuntu.com/ubuntu lucid-proposed main restricted universe multiverse --components main restricted universe multiverse --buildplace /var/cache/pbuilder/build//cow.21699 --no-targz --internal-chrootexec chroot /var/cache/pbuilder/build//cow.21699 cow-shell

From pbuilder man page:
--override-config
              Specify  to  use  different apt set up inside the chroot than it
              was used for creating the base.tgz.  Specify this when you  want
              to do pbuilder --update with a different distribution target set
              up.

              --distribution , --components , --mirror , --othermirror options
              are  only  valid  when  --override-config option is specified in
              --update target, or when pbuilder --create is being called.