I've noticed the same problem on Ubuntu and others (Xubuntu and Studio tested). The only way to solve this and activate X during startup is adding these lines:
GRUB_GFXMODE=1280x1024 GRUB_GFXPAYLOAD_LINUX=1280x1024 GRUB_VIDEO_BACKEND=vbe to the file /etc/default/grub (of course, you can select your own resolution). This error was corrected in Lucid and now it fails again in Maverick Release Candidate.
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