there is no lts.conf because its not needed for a running default setup
... if you set SCREEN_XX = startx you force the client to use xdmcp
(which is disabled by default in gdm and noencouraged to be used out of
security problems with it (you can take screenshots from a network
traffic dump and read all passwords in cleartext with xdmcp transport))

Alt-F1 simply doesnt work on purpose, since 
a) there are no users needed in a thin client chroot 
b) its a security risk to enable logins on an unneeded console ...
c) you can force a login shell through setting SCREEN_01 = shell in lts.conf

ldm uses an ssh tunnel, if you cant log in that can have two causes:
a) your ssh server isnt running on the server (fix: start it)
b) you changed the IP address of the server after installing and didnt generate 
new keys for it on the client (fix: run sudo ltsp-update-sshkeys on the server)

the lts.conf is only thought for fine tuning in ubuntu ltsp, all
defaults are autodetected and should give you a working environment
without tweaking *any* config files out of the box.

i dont think xubuntu is a mess, the transport you forced (xdmcp)
apparently breaks your keyboard (since it seems to work with ldm) thats
neither ltsp's fault (it doesnt use xdmcp) nor xubuntus fault, as i said
xfce with ltsp was tested by many people during teh dapper development
and is used by even more people out there with a defaul ltsp setup

-- 
After loading X on terminal keboard hangs
https://launchpad.net/bugs/58981

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