I had probably the same problem with an ATI 9100 (r200) using 
xserver-xorg-video-ati/xserver-xorg-video-radeon driver.
I noticed that 3d acceleration was working ("glxinfo|grep direct" showed 
"direct rendering: Yes" and glxgears worked fine), anyway seems like "lightdm" 
is not able to check it correctly.

Despite that, gdm seems to not have the same problem: doing "sudo 
dpkg-reconfigure gdm" and selecting "gdm" as default display manager solved my 
problem, though it is actually just a workaround.
Not sure if I'm completely right, but it seems to be at least related with 
lightdm, too.


** Also affects: lightdm (Ubuntu)
   Importance: Undecided
       Status: New

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which is subscribed to xserver-xorg-video-ati in Ubuntu.
https://bugs.launchpad.net/bugs/975414

Title:
  lightdm failed to run

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