It sounds like you're trying to make the grub changes on your (Xubuntu-installed) filesystem from a LiveCD. Is that correct? Please do explain what was wrong in the first place requiring a change.
If you are indeed running update-grub from a live CD you'll need to mount the virtual filesystems and chroot first:
NOW you can do grub-install and update-grub and whatnot and it'll operate on your installed system rather than the LiveCD.
# Mount root partition:
sudo mount /dev/sdXY /mnt # /dev/sdXY is your root partition, e.g. /dev/sda1
# If you have a separate boot partition you'll need to mount it also:
sudo mount /dev/sdYY /mnt/boot
# Mount your virtual filesystems:
for i in /dev /dev/pts /proc /sys /run; do sudo mount -B $i /mnt$i; done
sudo chroot /mnt