Thanks for the feedback, guys. I really appreciate you taking the time to think out loud with me.
Extra empty space there.
Woops! Extra spaces was one of the first things I looked for as well. Thanks for picking up on it.
Also, if this is USB, you need waitusb=10.
cat /proc/cmdline will show you what grub saw.
Cool! I was completely unaware of that command.
I figured out what the problem was and now it boots just fine. Here's what happened:
I had this feeling that grub got ignored altogether during boot up and that isolinux was used instead. So on a whim I checked my VirtualBox machine setup just to double-check that the original image was indeed ejected. Turned out that VirtualBox and me had different definitions as to what "eject" really meant. So I disabled the CD/DVD rom and booted up the machine. And that was all there was to it.
-Ingrid