It seems that I have gotten this issue after this update:
gdm (2.28.1-0ubuntu2) karmic-proposed; urgency=low
* Don't respawn gdm on failure; this lets us capture X failures instead and
trigger the bulletproof X handler here. LP: #441638.
* re-export any XORGCONFIG value passed to the upstart job, needed to
complete integration with bulletproof X. LP: #474806.
-- Steve Langasek <[email protected]> Wed, 04 Nov 2009
18:15:37 -0800
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Karmic gdm loops back to login after login
https://bugs.launchpad.net/bugs/454437
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