Ok, your config doesn't show anything weird

"WARNING: Failed to open log file /var/log/lightdm/x-0-greeter.log:
Permission denied" is an issue happening for everybody it seems and
likely has to do with some of the privilege drops fixes from before
Oneiric, it's worth a new bug if nobody opened one yet but it's not what
is breaking your system

your lightdm.log has

"[+2.52s] DEBUG: Launching process 13148: 
/usr/lib/lightdm/lightdm-greeter-session 'unity-greeter'
[+2.52s] WARNING: Failed to open log file /var/log/lightdm/x-0-greeter.log: 
Permission denied
[+2.52s] DEBUG: pam_setcred(0x230e7e0, PAM_ESTABLISH_CRED) -> 0 (Success)
[+2.52s] DEBUG: PAM returns environment 
'TH=/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games 
LANGUAGE=de_DE:en LC_MESSAGES=de_DE.UTF-8 LANG=de_DE.UTF-8'
[+2.54s] DEBUG: Process 13148 exited with return value 0"

Which is weird, notices that it starts at "TH=..."

on my log I get "DEBUG: PAM returns environment
'PATH=/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games
LANG=fr_FR.UTF-8'"

so it seems somewhat you pam environment get mangled, that might be a
different issues from the ones on this bug, could you restart your box
in its current state and open a new bug using "ubuntu-bug lightdm", it
should attach your log infos etc

what do you have in /etc/environment?

The "TH=" is weird, it should b "PATH="...

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https://bugs.launchpad.net/bugs/804171

Title:
  After latest upgrade of oneiric, Lightdm or Xserver not working

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