same problem here...

now I tried to install gdm2setup and change gtk theme to clearlooks, I
try do login and logout about ten times and only once gdm locked up and
restart, then I seems now I can login with nvidia-96 drivers enabled

this is the solution or not, but anyway I believe this is a good
workaround to the problem

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Mouse and keyboard stop working after selecting user
https://bugs.launchpad.net/bugs/553200
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