Ah-ha! Found it!
After a lot of trial and error, I isolated the issue in a specific package.

Downgrading xserver-xorg-input-evdev from version 2.1 to 
1:2.0.99+git20080912-0ubuntu6, fix this issue.
If I try upgrading again, everything breaks.

So, any idea on what was touched in evdev between intrepid and jaunty?

** Also affects: xserver-xorg-input-evdev (Ubuntu)
   Importance: Undecided
       Status: New

-- 
[jaunty] all entries (also passwords!) logged to terminal underlying the X 
server
https://bugs.launchpad.net/bugs/303228
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