GRUB2 is not working from pendrive

[J.Bakshi]

Dear list,

With legacy GRUB I have no problem to install it on a pendrive and boot the 
grub legacy from that drive. Presently I am trying to do the same with grub2.

My pendrive is 8 GB Transcend with 2 partitions. /devsda1 is fat32 (2 GB) 
and /dev/sda2 is reiserfs (6 GB).

My system is debian lenny and grub Version: 1.96+20080724-16

I have mounted my pendrive as ( the reiserfs partition)

~~~~~~~~~~~~~~~~~~~~~~~~~
mount /dev/sda2  /mnt/pen
~~~~~~~~~~~~~~~~~~~~~~~~~~~

Then install grub as

~~~~~~~~~~~~~~~~~~~~~~~~~
grub-install --root-directory=/mnt/pen /dev/sda2
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Grub install reports a success message. Then I copy grub.cfg from my HDD to 
the pendrive at the same location i.e /mnt/pen/boot/grub/

Now If I try to boot from the pendrive it says found boot record ...OK
and then displays GRUB but nothing further happens :-(

What might be the wrong I have done here ?

Please enlighten me.

thanks