Thank your for your fast answer.

The blinking cursor bug is a duplicate of bug 201591 and is caused by a
recent regression with latest ubuntu kernel and vesafb. However, before
I mark this bug as a duplicate, can you remove vga=795 from your
/boot/grub/menu.lst file and test if usplash works correctly without
vesafb?

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Dancing cursors instead of usplash
https://bugs.launchpad.net/bugs/206878
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