grub2 - Boot-up hangs unless I manually select the kernel in the bootloader

In my stock Ubuntu install (forgot which critter its named for, about one year old), I am able to boot up normally only if I manually select the kernel in the bootloader (Grub). If I step away and it boots from the default, the system will hang with the word "Ubuntu" on a graphics screen and a few white/red blinking dots beneath it.

uname -a

Linux digdug 2.6.32-42-generic #95-Ubuntu SMP Wed Jul 25 15:57:54 UTC 2012 i686 GNU/Linux

Synaptics says I have 'grub-pc' version 1.98-1ubuntu-13 installed.

My grub.cfg does have default="0" which I would expect to make the default be the first kernel shown in the selection screen.

The system is a laptop with an i7 processor, and I have had trouble with some kernels not being able to boot at all in the past, and power management is not working perfectly, but I have not had problems booting the latest kernel (2.6.32-42) if I select it manually in Grub.

Any idea what is going on here and how can I fix it so that I can re-boot unattended?

Edit

grub.cfg is on pastebin.

And so is /etc/default/grub.

Edit 2

Based on Sly's advice, I tried

mb@digdug:~$ sudo grub-mkconfig -o ./test.grub.cfg
Generating grub.cfg ...
Found linux image: /boot/vmlinuz-2.6.32-42-generic
Found initrd image: /boot/initrd.img-2.6.32-42-generic
Found linux image: /boot/vmlinuz-2.6.32-41-generic
Found initrd image: /boot/initrd.img-2.6.32-41-generic
Found linux image: /boot/vmlinuz-2.6.32-40-generic
Found initrd image: /boot/initrd.img-2.6.32-40-generic
Found linux image: /boot/vmlinuz-2.6.32-39-generic

Found initrd image: /boot/initrd.img-2.6.32-39-generic
Found linux image: /boot/vmlinuz-2.6.32-28-generic
Found initrd image: /boot/initrd.img-2.6.32-28-generic
Found linux image: /boot/vmlinuz-2.6.32-24-generic
Found initrd image: /boot/initrd.img-2.6.32-24-generic
Found memtest86+ image: /boot/memtest86+.bin
Found Windows 7 (loader) on /dev/sda1
Found Windows 7 (loader) on /dev/sda2
Found Windows Vista (loader) on /dev/sda4
done

mb@digdug:~$ diff /boot/grub/grub.cfg test.grub.cfg
mb@digdug:~$ 

indicating, AFAICT, that grub-mkconfig has precisely reproduced my existing grub.cfg.

Is it possible that init somehow knows I've booted by default and has triggered some long disk tests or something that are making me think the boot is hung?