Me too with this issue after xorg update. Here on a ATI Radeon Xpress 1100. 
Reverting to older packages resolved the problem. I try again and download the 
new packages and the same problem. Using GDM no problem to login. Now I use the 
following command proposed at the forum,  
http://ubuntuforums.org/showthread.php?t=1343261&page=5, and  KDM is working 
without problem with all the new packages:
cd /etc/init
sudo mv failsafe-x.conf failsafe-x.conf-disable
cd /etc/init.d
sudo mv failsafe-x failsafe-x-disable

-- 
after recent update which included xorg, xserver etc causes low-graphics mode 
error at start
https://bugs.launchpad.net/bugs/491483
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which is subscribed to xorg-server in ubuntu.

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