Hmm, that’s odd, it chooses the i386 BIOS variant. This is a x86_64 image, right?
Can you try to add --target=x86_64-efi to the line in grub.sh that it mentions? There is a line right below it which is very similar; you should add it there too.
Don’t forget to run ./docker-build afterwards to rebuild the mender-convert Docker image before trying to convert again.