i am having a similar issue. i couldn't install or login through the
normal gnome session unless using failsafe session. but the same time,
kubuntu 7.10 is runing flawlessly. here is my setup:

dump from lspci:

00:00.0 Host bridge: ATI Technologies Inc RS480 Host Bridge (rev 10)
00:01.0 PCI bridge: ATI Technologies Inc RS480 PCI Bridge
00:18.0 Host bridge: Advanced Micro Devices [AMD] K8 [Athlon64/Opteron] 
HyperTransport Technology Configuration
00:18.1 Host bridge: Advanced Micro Devices [AMD] K8 [Athlon64/Opteron] Address 
Map
00:18.2 Host bridge: Advanced Micro Devices [AMD] K8 [Athlon64/Opteron] DRAM 
Controller
00:18.3 Host bridge: Advanced Micro Devices [AMD] K8 [Athlon64/Opteron] 
Miscellaneous Control
00:19.0 PCI bridge: ALi Corporation M5249 HTT to PCI Bridge
00:1b.0 Ethernet controller: ALi Corporation ULi 1689,1573 integrated ethernet. 
(rev 50)
00:1c.0 USB Controller: ALi Corporation USB 1.1 Controller (rev 03)
00:1c.1 USB Controller: ALi Corporation USB 1.1 Controller (rev 03)
00:1c.2 USB Controller: ALi Corporation USB 1.1 Controller (rev 03)
00:1c.3 USB Controller: ALi Corporation USB 2.0 Controller (rev 01)
00:1d.0 Audio device: ALi Corporation High Definition Audio/AC'97 Host 
Controller
00:1e.0 ISA bridge: ALi Corporation PCI to LPC Controller (rev 31)
00:1e.1 Bridge: ALi Corporation M7101 Power Management Controller [PMU]
00:1f.0 IDE interface: ALi Corporation M5229 IDE (rev c7)
00:1f.1 RAID bus controller: ALi Corporation ULi 5287 SATA (rev 02)
01:05.0 VGA compatible controller: ATI Technologies Inc RS482 [Radeon Xpress 
200]
02:10.0 Communication controller: Conexant HSF 56k Data/Fax Modem (rev 01)

hope this helps.

** Attachment added: "buglog.zip"
   http://launchpadlibrarian.net/10632040/buglog.zip

-- 
Refusing to initialize GTK+.
https://bugs.launchpad.net/bugs/158875
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