As you can see from line "a" above, the login prompt actually is
displayed, however it is displayed before the initscripts are run.  If
you press enter, the login prompt should reappear.

I am experiencing the same problems with Feisty (Server edition).

I tried changing the setting "DELAYLOGIN" in /etc/default/rcS but it has
no effect.  Is this an upstart bug for not adhering to this setting?

-- 
startup messages continue on screen after first login prompt appears
https://bugs.launchpad.net/bugs/65230
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