I have this same issue, but running Intrepid alpha 3 within a vmware 
workstation. I did saw a message about not able to create the directory volatile
* Preparing restricted drivers...       mkdir: cannot create directory 
`/lib/modules/2.6.26-5-generic/volatile/': Read-only file system

Maybe this has something to do with not being able to grab my mouse and 
keyboard.
Here only the recovery console gives me a login and options to fix this problem.

Tux

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[intrepid] mouse and keyboard stop working under gdm and gnome
https://bugs.launchpad.net/bugs/254840
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