This is frustrating. Installing the Debian system in development (SID, AKA squeeze) is really broken currently. Installing GRUB or GRUB2 just does not work at all and can ruin your day. You get all the way to the end of the install when the error pops up. During the install of either GRUB or GRUB2.
Here is what you can do to fix this:
1. Choose to install GRUB2 and let it fail; be sure to allow GRUB to write to the MBR.
2. Go back to the main menu of installer items and choose "continue without installing a bootloader". Trust me on this one, it will all work out.
3. reboot your machine, the grub (this will be the GRUB2) bootloader prompt will be presented. This is your ticket back into your newly installed system
4. At the "grub>" prompt, type the following: (you may need to adjust the boot drive)
linux hd(0,1)/boot/vmlinuz-2.6.32-5-amd64 root=/dev/sda1
of course substitute the kernel and initrd you are using for the real ones. Also check the root drive for the correct one. Sometimes you can just guess, the machine will just not boot if it is wrong and you can go back and do it again until you get it right.
Then once you have everything booted. You can install GRUB2 properly by doing the following:
apt-get install grub2
grub-mkconfig > /boot/grub/grub.cfg
All should be well after the reboot.