the current version upstart script has

"    # Check kernel command-line for inhibitors
    for ARG in $(cat /proc/cmdline)
    do
        case "${ARG}" in
            text|-s|s|S|single)
                exit 0"

the change has been uploaded in gdm 2.27.90-0ubuntu7 which should fix
the issue

** Changed in: gdm (Ubuntu)
   Importance: Undecided => Low

** Changed in: gdm (Ubuntu)
       Status: New => Fix Released

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Login Prompt on Live CD Text Mode
https://bugs.launchpad.net/bugs/434769
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