dgilmore brought it to my attention that the code to grab releasever for the substitution doesn't work inside a chroot -- the rpm database isn't available for reading.
Another issue with it is that by pulling from the host's rpmdb it isn't very flexible. What if you wanted to pull from a repo with a different release?
I think the best solution is to add a command-line --releasever=XXX to livecd-creator, that way it can be easily specified.
Does anyone have a better idea?