How do I get my phone to connect the internal SD by USB?
There's no problem with Ubuntu, problem is most probably in your phone settings or your phone system. It would be very helpful to know from which source did you get your upgrade, was it official update from your phone provider or something found on the net?
According to your picture you have 12GB of internal storage and 16GB SD card inserted in your phone. Numbers you see are the result of conversion of 16.000.000.000 bytes (which is 16GB as memory or HDD manufacturers think) into the gigabytes, each containing 1024*1024*1024 = 1073741824 bytes. If you divide the 16.000.000.000 by 1024*1024*1024 you'll get your 14.9GB or something.
Grayed out "Mount SD card" under USB storage possibly represents the external USB storage you might insert into the USB port of your phone. There's no reason to click on it, unless you have the external USB storage plugged in. And even then, I'm not sure if this is actually supported on SGS2.
Missing from your screen grabs, there supposed to be a "menu" option below the "Storage" page, usually represented as three dots aligned one above the other. If you click on this "menu", you'll most probably be shown "USB computer connection" submenu or something similar. Once you get there, you may change how your phone represents the memory you have to the computer. If you make a screen grab of that screen, I could tell you which option to select.
As a side note, it's not a very good idea to remove/insert SD card without unmounting it first. Please, next time you remove SD card from your phone, power the phone off or issue "Unmount SD card" from the "Storage" screen you've shown in the question.




If you could not find "USB computer connection" submenu on the Storage screen, you may try this approach to make USB mass storage to work on your device:


Open Settings, then click More… (under Wireless and network).
Select USB utilities / Set USB cable connection mode.
Select "Connect storage to PC".
Connect USB cable from phone to PC.
Click "Turn on USB storage".


Also, you might need to turn OFF "USB debug" before trying this.