I hope that the victims of this bug will find this useful...

I installed an alternative login manager called "LXDM".

$ sudo aptitude install lxdm

make sure right then to select lxdm as the default login manager.

After installing this fine login manager, I can actually log on the
machine. Everything seems to work OK.

The issue, I think, is with X drivers, but using LXDM bypasses it.

-- 
Lucid -- Xorg crashes when user is selected in GDM
https://bugs.launchpad.net/bugs/564032
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