Yep, setting to 'show the screen for choosing who will log in' breaks
it. Can't unlock System|Administration|Login Screen.  If I log back in
via the recovery/Ctrl-Alt-F1 mode I see that /etc/gdm/custom.conf has
been modified to:

[daemon]
AutomaticLogin=<username>
AlwaysLoginCurrentSession=false
AutomaticLoginEnable=false
TimedLoginEnable=false
TimedLogin=<username>
TimedLoginDelay=30
DefaultSession=gnome

Changing 'AutomaticLoginEnable=false' to 'AutomaticLoginEnable=true' and
rebooting works & autologin restores the desktop. Plus I can unlock
System|Administration|Login Screen again (get prompted for a password,
etc).

System|Logout <username>|Log out|  and trying to login as another user
results in the frozen mouse, and original issues. So the problem must be
in the gdm configuration files somewhere.

-- 
lucid lynx - login screen stuck in a loop - SYSTEM BROKEN
https://bugs.launchpad.net/bugs/516520
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