It turns out that Matthieu Herrb answered this question on
the Xpert list. He says:
You're probably running in 8 bits depth on your card. There's a small
problem with the Xrender extension at 8 bpp on XFree86 4.2.0 that
doesn't leave enough free color cells to display the XFree86 logo in
xdm. If your card has enough memory and bandwith to support 16 or 24
bpp, switch to that . (Add "DefaultDepth 16" or "DefaultDepth 24" to
the "Display" section of your rXF86Config file).
If you can't do that, use an icon with less colors in
/etc/X11/xdm/Xresource for the xlogin*logoFileName resource.
This problem is fixed in -current XFree86.
Since the default bits-per-pixel is 8, this bug will probably
bite anyone who tries to install XFree86 4.2.0 out of the box
with XDM enabled. And I think he means the "Screen" section rather
than the "Display" section. Whatever, it cured my problem.
Note you can't just comment out the 8-bits-per-pixel "Display"
section. The server still defaults to 8 bpp and if it can't find
a matching "Display" entry it complains and hangs. You need to
insert the "DefaultDepth 16" directive.
It appears that there are lots of things that will make XDM
loop, by the way. And earlier releases of XDM ignored the
"startAttempts" parameter in the config file and looped forever.
Downloading, compiling and installing XFree86 4.2.0 from source will
install a corrected XDM, at least, that no longer loops forever
when it does loop.
Mike O'Brien
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