I realize that this is an old post, but I just found this while attempting to find out more about this exact same issue and this is still the best discussion of its kind. It's helped me immensely.
According to Paul Randal, the log file is in reality composed of Virtual Log Files at 512KB each. Robert, on the other hand, said that a 5MB initial log size works fine with 10% increments. So that got me doing some simple math.
5MB = 5120KB. 10% growth from 5120KB is exactly 512KB, or 1 VLF's size! With Will's log file of only 1MB (or 2MB in my case), 10% growth results in attempts to grow by 102.4KB (or 204.8KB for me), which is smaller than even 1 Virtual Log File! I believe this is the reason the log can't grow! Robert's solution to increase the initial size of his log helped start up the increments. Another solution (not tested, but I bet would work) would be for Will to increase the increments to 50%, or for me to 25%. Of course, I would not recommend this because even if it means a mere 512KB growth the first time around, it can cause some tremendous increase later. The other alternative is to set the growth to in 1MB increments. Given that we expect small logs with slow growth, that may be a good solution. Naturally, if the expected growth is much bigger, such a small growth would mean that the logfiles need to be grown too often, which will affect performance. Either way, any of these solutions should work well in avoiding 9001/9002 errors with Unrestricted Growth, on servers that have plenty of free HDD space.