It all comes down to a bug essentially where you are running an older kernel that doesn't support the newer Debian templates.  The solution is to update your OpenVZ kernel.

Here are some symptoms of the problem/lack of kernel support:

Ubuntu Template 12.04 requires a manual network start:
service networking start

sshd will not start:
/usr/sbin/sshd
PRNG is not seeded

mknod /dev/random c 1 8

service ssh start
ssh start/running, process 30022

#but netstat does not show it running

#also no processes are started it looks like init is not getting called.

init 2

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