I am using an older S3 chipset, and am experiencing the same problem. I
have tried to change the colour depth, and that allowed me to log in.
But trying to open a terminal causes a crash.  This is an upgrade to
7.04 from 6.10. Everything worked fine before, so I don't know what
changed.

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i810 + xorg = xfce crashes when opening terminal
https://bugs.launchpad.net/bugs/91849
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