Seeing the exact same behavior here on the same hardware: a Dell Inspiron 1525 
with Intel GM965 / X3100 graphics chipset.  Reiterating above:
  + mouse pointer still moves around, nothing else works.
  + only way out is hard reset.
  + can remotely login, but find absolutely nothing abnormal in log files 
(syslog, Xorg.0.log, etc).

For the record, I don't have slideshow wallpaper nor plasma widgets, so
I don't think that's it.  I do have desktop effects enabled. This laptop
ran fine with Ubuntu 8.10 and 8.04, so something is different here; I
suspect the Intel graphics driver.  The install of 9.04 was a clean wipe
& install.  No idea how to troubleshoot this one, but it makes the
system unusable.

Also, I am using the latest stable Xorg drivers (via the X-Updates PPA),
UXA acceleration, and have the workaround for the MTRR bug in place.
More details on all that can be found here --
http://ubuntuforums.org/showthread.php?t=1130582.

-- 
Entire system crashes in Jaunty periodically
https://bugs.launchpad.net/bugs/366796
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