Same problem with 7.10 on Dell inspiron 4000.  The screen initially
blanks for about 1 second, then activates again. If the lid is closed
while at the login screen, nothing happens.

I'm 99% sure this feature worked under 7.04.  I confirmed the above that
/proc/acpi/button/lid/LID/state correctly shows if the lid is open or
closed.  I've also confirmed that acpi is receiving the lid open/close.

@ubuntu:~$ acpi_listen
button/lid LID 00000080 00000003
video VID 00000080 00000000
button/lid LID 00000080 00000004
video VID 00000080 00000000

Furthermore, running the command below, causes the screen to blank
correctly, and stay blanked until mouse or keyboard brings video back.

@ubuntu:/etc/acpi$ /etc/acpi/screenblank.sh

-- 
Laptop (DELL); when closing lid screen stays on
https://bugs.launchpad.net/bugs/123487
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