Hi James, you are not alone anymore :-D.
I had the same problem, but in different situation (not doing an upgrade). I used init with option "-v" and it reported ( I don't know if it helps, Scott):
"init: Reading configuration from /etc/event.d"
But, it hangs after this message and scripts in /etc/event.d are not executed. Using other kernel, with CONFIG_INOTIFY enabled, the startup continues as expected.
I am using a kernel compiled by myself and I was trying to modify a livecd (phantomsystem, at sourceforge) based on systemv startup. My idea is to use upstart instead old init.
Just for helping other people: CONFIG_INOTIFY can be set at submenu "File Systems", option "Inotify file change notification support".