I have just tried the lucid alpha2, and that still failed for me.

For karmic, I have tried some more variations, including upgrading
various gnome packages, gdm, trying other display managers,
upgrading/downgrading xorg and with it the video drivers, and also
trying various kernels.

It is difficult to keep track of all variations, but it seems like it has 
nothing to do with graphics.
I made a clean installation of karmic, applied all updates, then removed a few 
unneeded services, including pulseaudio, rebooted, and the system worked. 
however, I then tried installing pulseaudio again, and the system rebooted in 
the middle of the package configuration..

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karmic release candidate restarts computer when starting
https://bugs.launchpad.net/bugs/458676
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