a) I think gdm is the wrong package on several counts the most important
being that this is a server install and there is no mention of a
graphical login, and I experience this on an server with no console as
well

b) I think this is related to samba / winbindd because when I checked
the logs there were error messages related to winbindd (this is a Linux-
only network, however it appears winbindd is now a default part of the
Ubuntu installation).

c) I modified /etc/samba/smb.conf to have the line
auth methods = guest sam winbind

and logins on the console worked correctly where they hadn't before.

** Tags added: samba winbind

** Tags added: console login timeout

-- 
Lucid server upgrade login times out
https://bugs.launchpad.net/bugs/584428
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