I've run in the same issue on a Celeron 2.0 Ghz box with 2GB DDR3200 RAM. I am attempting to install the i386 10.10 and I receive that same error. I really didn't need the GUI anyways so I am burning the server edition to CD right now. Unfortunately for me this machine is dated so I have no option to boot from USB.
Will post back results, I am not sure of the cause, nor have I been able to find a resolution to fixing it.
I started originally with this error, but now have upgrade to the one above:
(initramfs) mount: mounting /dev/loop0 on //filesystem.squashfs failed: Input/output error
Can not mount /dev/loop0 (/cdrom/casper/filesystem.squashfs) on //filesystem.squashfs
GLib-WARNING **: getpwuid_r(): failed due to unknown user id (0)
Wish I had a fix, I have installed Ubuntu hundreds upon hundreds of times and this is my first issue during bootup. If I run into the same issue with 10.10 Server I am going to go to 10.4 LTS.