Further to my earlier comment, I tried regenerating the ubuntu memory
stick, and added a second user with administrator privileges the first
time I used it.  The second time I used it, ubuntu would not log in with
the .ICEauthority problem.  I switched users to investigate further.  I
looked at ../ubuntu/.ICEauthority and the permissions looked OK.  I
tried switching users back to ubuntu but still could not log in.  When I
tried to use sudo on my second id, I got syntax errors on lines 20
through 31 in the sudoers file.  Clearly, generating a second user with
administrator privileges does not work correctly.  When I restarted the
computer and tried to log in again on my second id, I then got the same
gnome/.ICEauthority problem with that id too. The memory stick works in
non-persistent (live) mode.

This does not look good! I hope this bug is assigned some higher
priority.

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can't logon using USB dongle with 7.10
https://bugs.launchpad.net/bugs/197454
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