Actually the problem is now gone. Unfortunately I was not careful to record the order of steps taken, but here goes:
I looked at the logs and noticed exim4 (MTA) has not starting up properly, so did dpkg-reconfigure exim4-config, which fixed that. I disabled acpid (But I think I this this before with no difference). I also purged and reinstalled portmap as that was unresponsesive to stop and restart commands. At the end I installed kde-core in the hope that KDE would fare better. After this I tried to log out of Gnome to start a KDE session, only to dicover the logout now works. It been a weird experience, but at the time I experience the issue the system was 'clean'. I did a standard install from etch CD1 only (base + desktop environment tasks). upgraded to testing and then sid. during the upgrade apt had to remove gnome-desktop-environment to fulfill dependencies (also I had to force glibc in manually with dpkg). after the system was completely on sid I installed gnome-desktop-environment back and had could not logout after restarting into a gnome session. No configuration changes of happened during the process. Anyway thanks for your help.
