OK, tried the following:
- boot into rescue mode
- choose 'resume normal boot'
- this gives me a pure text mode login, no virtual tty
- login with user/passw as normal
- change my password with 'passwd' (success)
- reboot with sudo reboot
- booted the normal way
- got exactly the same situation as earlier this morning: login window resets 
within a second and I don't get to fill in my password

So I rebooted again and used my workaround (rescue mode, resume normal boot, 
login in text mode) to get in.
After that I reset my password to what it was and started X (startx).
After that I got into my normal desktop and everything works OK.

Note: switching to a tty session will *not* work, since KMS ant ATI do
not play together very well (bug 509273).

 
cheers
Tom

-- 
lucid lynx - login screen stuck in a loop
https://bugs.launchpad.net/bugs/516520
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