Creating a new site based on a custom site definition, you get the above error.
Cause: This error is caused by one of the aspx files in your site definition referencing and invalid master page. ei not default.master
Work Around: The only work around I've found is to put your custom master page in the masterpage library of the top site.
Even if the master page exists in both \Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\GLOBAL & LAYOUTS it will not work.
Update:
OK had this issue again and its caused by the SP dll not finding the master page defined in the aspx page.
The fix is to make sure it can.
Options:
Put the masterpage at the site collection level, use it's absolute path (/_catalogs/masterpage/new.master or ~sitecollection/_catalogs/masterpage/new.master)
Use a site local masterpage library and use (~site/_catalogs/masterpage/new.master)