Comment 3 for bug 1339687

Researching this issue a bit more, I edited /usr/sbin/debootstrap and added KEEP_DEBOOTSTRAP_DIR=true
I notice a lot of failures in the debootstrap/debootstrap.log when vmbuilder was setting up the packages.
My problem was that I was attempting to create a vm with a newer Ubuntu suite (saucy) than I was currently running.
I was running vmbuilder on 12.04 (precise), and attempting 'saucy'.
I followed this (very nice) writeup: http://www.howtoforge.com/virtualization-with-kvm-on-ubuntu-12.04-lts

After changing this command:
/var/lib/libvirt/images/vm1# vmbuilder kvm ubuntu --suite=saucy --flavour=virtual --arch=amd64 -
-mirror=http://archive.ubuntu.com/ubuntu/ -o --libvirt=qemu:///system --ip=192.168.122.101 --gw=192.168.122.1 --part=vmbuilder.partition --templates=mytemplates --user=administrator --name=admin --pass=admin --addpkg=vim-nox --addpkg=unattended-upgrades --addpkg =acpid --mem=256 --hostname=vm1 --bridge=virbr0 --debug --verbose

to --suite=precise (like the writeup said)... it worked like a charm.
Note: there's a long pause at: 'INFO : Calling hook: bootstrap' -but if you tail-f debootstrap.log, it's doing a lot of work.
Eventually vmbuilder returns to showing you progress.

This bug no longer affects me. Thanks.