have the same bug.

Customized and up-to-date Ubuntu 9.04.

After I turned on auto-login in system-settings>login-
manager>convenience, I got this exact same message when kdm (I guess)
starts: "kstartupconfig4 does not exist or fails. The error code is 3.
Check your installation".

I just have to click "Ok" to continue to the login screen as it would if
auto-login was not enabled.

Maybe I should also add I use en encrypted home directory on ext4
partition.

-- 
auto-login won't work
https://bugs.launchpad.net/bugs/368061
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