Comment 25 for bug 259156

Hmm, looking at all the various logs, there still doesn't seem to be any error message indicating that X is doing something wrong. So not sure that this can be troubleshot from the X angle... I know this was rejected as not being a gdm issue, but given that xdm is working, it makes me wonder if there is something GNOME-ish broken.

gdm is configured with the /etc/gdm/gdm.conf file. Can you experiment with removing or changing some of the parameters in that file, particularly as relates to anything mentioning "failsafe"?

It would also be helpful if you could try booting a Jaunty LiveCD (ISOs available at http://cdimages.ubuntu.com/releases/jaunty/) and seeing if you can reproduce the issue there.