Steps:

Boot grml 1.0 CD-ROM with a USB disk plugged in as the only USB device.
netcardconfig
apt-get install grml2hd  # to get latest grml2hd
grml2hd /dev/sdaN -mbr /dev/sda

Reboot to USB.  GRUB offers a menu, but reports it can't find an OS.  GRUB is
configured wrong?

/etc/fstab shows proper UUID for the root partition.
Boot stanza in /boot/grub/menu.lst =

title           Debian GNU/Linux, kernel 2.6.20-grml
root            (hd3,5)
kernel          /boot/vmlinuz-2.6.20-grml root=UUID=[snip] ro vga=791
initrd          /boot/initrd.img-2.6.20-grml
savedefault