A colleague of mine was also affected by this bug upgrading to 12.04.
Just had to change the owner of the .Xauthority file:
chown myuser:myuser /home/myuser/.Xauthority
(.Xauthority was previously owned by root).

But from the user point of view, this bug is really hard to understand.
When he try to login, the screen just get back to the login screen after
few seconds. There is no error message, neither no log about what is the
issue anywhere.

It would be good to at least have an error message giving a clue about
what is the problem.

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You received this bug notification because you are a member of Desktop
Packages, which is subscribed to lightdm in Ubuntu.
https://bugs.launchpad.net/bugs/871667

Title:
  .Xauthority sometimes owned by root, which blocks login

Status in “lightdm” package in Ubuntu:
  Fix Released
Status in “lightdm” source package in Oneiric:
  Fix Released

Bug description:
  Each time I upgrade to a newer ubuntu on a particular machine, something 
breaks. Last time I was unable to log in via GDM and I have to reinstall the 
machine. This time, I upgraded to oneiric today, and, of course, lightdm cannot 
start unity nor unity-2d: after entering a correct password it just restarts 
itself.
  This is a report using apport-cli - a duplicate of 
https://bugs.launchpad.net/ubuntu/+bug/871664

  ProblemType: Bug
  DistroRelease: Ubuntu 11.10
  Package: lightdm 1.0.1-0ubuntu6
  ProcVersionSignature: Ubuntu 3.0.0-12.20-generic 3.0.4
  Uname: Linux 3.0.0-12-generic x86_64
  ApportVersion: 1.23-0ubuntu3
  Architecture: amd64
  Date: Mon Oct 10 11:58:51 2011
  EcryptfsInUse: Yes
  InstallationMedia: Ubuntu 10.10 "Maverick Meerkat" - Release amd64 (20101007)
  ProcEnviron:
   SHELL=/bin/bash
   PATH=(custom, user)
   LANG=en_US.UTF-8
   LANGUAGE=en_US.utf8
  SourcePackage: lightdm
  UpgradeStatus: Upgraded to oneiric on 2011-10-10 (0 days ago)

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