If image made with FILES=, x86_64 combined squashf target hangs during boot

After sysupgrade, my OpenWRT x86_64 (combined-squashfs) install wouldn't boot. After many hours, I realized the problem was something I noticed before: if the imagebuilder image is built using the "FILES=" option, the system will not boot. If you build with the same set of packages but without specifying FILES=, that image will boot (to defaults).

I noticed this with 17.01 and actually forgot. I'm planning to report this as a bug as I have thoroughly tested it. But, I thought I would throw it here, anyway.

Anybody else notice this?

What's inside your FILES directory?

Files from config backup. I thought that made sense, but maybe not.

I checked the filesystem after flashing it and it looks okay, in the sense that everthing seemed to be in the right place, where I expected it to be. When I boot the image on VM I get the same behavior, so it's not the hardware.