As I was bitten by this during my recent virtualization efforts[sup]¹[/sup] and the error message …
The file /boot/grub/stage1 not read correctly
… caused some grief – with google bringing no relief –, I would like to point to the posting How to install Grub from a live Ubuntu cd at the Ubuntu Forums.
I haven’t tried this yet step by step (I just installed a fresh 8.04.1 on a new shiny .vmdk and then got the old, now virtual, system up and running by using the 8.04.1’s grub to boot my 7.04 system over at root=(hd1,1)), but it sound as if it should work as well from an (Ubuntu) rescue image.
_____
[sup]¹[/sup] The problem was that the physical box booted from /dev/sda, but root for this installation was at /dev/sdb1. So, dumping /dev/sdb1 and the MBR of /dev/sdb brought no boot code from grub to the virtual instance. Doing a rescue boot and trying to restore grub both via Menu as well as from the chrooted shell only gave above error message. “update-grub” was no help, either. Something like that can really ruin your day ;-)