Comment 3 for bug 569946

Fixed at rev 109.

Example:
...
E: Failed to add user 'admin'
E: useradd: group admin exists - if you want to add this user to that group, use -g.
E: Besides possible user name conflicts, while adding the user a new group is created with the same name as the user, so avoid using existing group names
[ 162.519618] Kernel panic - not syncing: Attempted to kill init!
E: Second stage build in Virtual Machine failed !
E: Please see the log to see what went wrong.
I: Cleaning up...
I: Killed qemu...

The problem is that you'll get this error just after almost finishing the image, but is the only way if you don't want to cache the user/group list and check them.