I've modified /etc/gdm/gdm.conf and restarted. Everything seems normal.
As an added bonus the locked screen feature is working.

I always thought that Xubuntu had terribly limited functionality, but
now it seems ok. Xubuntu even has a graphical file searching app (as of
8.10) which is called Catfish.

Anyway, thanks for the really quick response. I'm surprised at how
easily the issue can be fixed. How come this wasn't fixed in Xubuntu
8.10? They should really do something about it. They also need to
automatically fix the usplash resolution, otherwise you get a blank
screen instead of a loading bar + logo.

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xubuntu blank screen and no screen saver
https://bugs.launchpad.net/bugs/313045
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