I can reproduce something very similar. I installed Ubuntu 8.10 - Upgraded and 
did a Dist-Upgrade.
Enabled the Restricted Hardware Driver for Nvidia 177x

Rebooted, and it drops me to the Terminal.

I have also re-installed completely and attempted to manually install the 
Nvidia Drivers x_86_64 and have the same problem.
I used Ubuntu 8.10 64bit / with Nvidia 2x Geforce 8800GT

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Ubuntu 8.10 breaks nvidia drivers
https://bugs.launchpad.net/bugs/267188
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