The problem seems to be in startup scripts, not stopping plymouth before xdm 
loads; if I manually stop plymouth, X starts up properly.
With lightdm I see continuous X restarting, but that's another bug, not related 
to this.

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https://bugs.launchpad.net/bugs/872464

Title:
  Xorg does not start with i915 driver with Ubuntu 11.10 beta2

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