Upgrade from Lucid : "failed to load session ubuntu"

[wilfried]

Upgraded from Lucid to 12.04.1
System reboots ok and shows login screen.
On password confirmation, system tries to login to gnome, but only returns message "Failed to load session ubuntu" with only option to log out.
SSH login works fine.
VNC login returns the error message. VNC also shows a terminal window to which I fall when i press log out. Bacground is grey.

The following may be related : looking for a solution in SSH i tried to disable the screensaver and received the below error message :
** (process:3033): WARNING **: Command line `dbus-launch --autolaunch=4bf1c0a9a47a73a47de5d7714ef8a5b3 --binary-syntax --close-stderr' exited with non-zero exit status 1: Autolaunch error: X11 initialization failed.\n

I also tried to restart the X-server and got the below messages :
[ 1434.716] _XSERVTransSocketUNIXCreateListener: ...SocketCreateListener() failed
[ 1434.717] _XSERVTransMakeAllCOTSServerListeners: server already running
[ 1434.717]
Fatal server error:
[ 1434.717] Cannot establish any listening sockets - Make sure an X server isn't already running
[ 1434.723]
Please consult the The X.Org Foundation support
  at http://wiki.x.org
 for help.
[ 1434.723] Please also check the log file at "/var/log/Xorg.0.log" for additional information.
[ 1434.723]
[ 1434.724] ddxSigGiveUp: Closing log
[ 1434.724] Server terminated with error (1). Closing log file.

ProblemType: Bug
DistroRelease: Ubuntu 12.04
Package: libgnome-desktop-3-2 3.4.2-0ubuntu0.1
ProcVersionSignature: Ubuntu 3.2.0-29.46-generic-pae 3.2.24
Uname: Linux 3.2.0-29-generic-pae i686
ApportVersion: 2.0.1-0ubuntu12
Architecture: i386
Date: Mon Aug 27 08:34:23 2012
InstallationMedia: Ubuntu-Server 10.04.3 LTS "Lucid Lynx" - Release i386 (20110719.2)
ProcEnviron:
 LANGUAGE=en_GB:en
 TERM=xterm
 LANG=en_GB.UTF-8
 SHELL=/bin/bash
SourcePackage: gnome-desktop3
UpgradeStatus: Upgraded to precise on 2012-08-26 (0 days ago)