I am just updating to 10.3-BETA2 with freebsd-update and it starting copying my entire filesystem into /boot/kernel.old/ After some debugging I found out that this is due to a mechanism where it detects the kernel dir from kern.bootfile. Since I have a slightly more sophisticated setup where I use grub, this variable ends up being /kernel => freebsd-update assumes that / is the kerneldir and copies *everything* into the backup dir as mentioned above. I think this is bad behaviour, a smart thing would be to check if the directory pointed to by kern.bootfile actually contains a kernel file, and if not ask the user to specify the directory or skip the backup process entirely. Most users rely on snapshots nowadays so this step is not really crucial. And / should never be accepted as KERNELDIR IMHO. Thank you!
I have several Atom machines where this happens. The value of kern.bootfile is "/kernel" instead of "/boot/kernel/kernel".
*** This bug has been marked as a duplicate of bug 202710 ***