Kwin seems to cause part of the problem with NO compiz effects.
I logged in as before to the grey screen and then pressed Ctrl-Alt-F1 and 
entered the command
$ax | grep compiz.real
Compiz was not running at all (I've yet to install it in Kubuntu).
 I then tried
$top
and it seems that xorg and kwin was using 100% of my processors (hence nothing 
worked).
Rebooted into recovery mode and even though xorg.conf was fine I ran xfix. 
Kubuntu working again.

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[Jaunty]No X display after log-in
https://bugs.launchpad.net/bugs/326559
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