We've the nls_ascii module in our initramfs nowadays, so I think this is fixed
nowadays. If not please reopen/report.

Thanks folks!

regards,
Mika

Thank you for the quick response.  This was the fix I needed.

This is most probably related to this bug:
https://bugs.debian.org/cgi-bin/bugreport.cgi?bug=850532

You can work around it by, for example, adding iocharset=iso8859-1 to
/lib/live/boot/9990-misc-helpers.sh, line 234, within the initrd.img. You have
to unpack and repack it, like this:

mkdir initramfs
xz -d -c initrd.img > initrd.cpio
cd initramfs ; cpio -i -d -H newc --no-absolute-filenames < ../initrd.cpio
<modify>
find . -print0 | cpio --null -ov --format=newc | xz -9 --check=crc32 --x86
--lzma2=dict=512KiB > ../new_initrd.img

I've been using grml{32,64}-full_testing for years now and since the linux-image
upgraded from 4.1 to 4.8, I can boot the latest testing iso from a UFD just fine
using dd.  When I use grml2usb, it copies the iso to a UFD without error, but
when the UFD boots, all seems well with the splash screen, loads essential
drivers, runs /scripts/init-premount, then fails on Mounting root file system with:
mount: mounting /dev/sdb1 on /live/medium failed: Invalid argument.
I've done this many times over the years successfully, up until late 2016/early
2017 when the kernel upgraded.  I've been successfully using an older iso with
the older kernel and chroot'ing to do updates and add packages, then rebuilding
the fs.squashfs and iso.  I've had to apt-mark hold linux-image-* just to keep
it working with grml2usb.  I like downloading a fresh image every now and then
to work with and would like to be able to use the newer kernel.  Am I
overlooking something obvious, or could this be a bug that hasn't been noticed yet?