Comment 35 for bug 804171

Ok, your config doesn't show anything weird

"WARNING: Failed to open log file /var/log/lightdm/x-0-greeter.log: Permission denied" is an issue happening for everybody it seems and likely has to do with some of the privilege drops fixes from before Oneiric, it's worth a new bug if nobody opened one yet but it's not what is breaking your system

your lightdm.log has

"[+2.52s] DEBUG: Launching process 13148: /usr/lib/lightdm/lightdm-greeter-session 'unity-greeter'
[+2.52s] WARNING: Failed to open log file /var/log/lightdm/x-0-greeter.log: Permission denied
[+2.52s] DEBUG: pam_setcred(0x230e7e0, PAM_ESTABLISH_CRED) -> 0 (Success)
[+2.52s] DEBUG: PAM returns environment 'TH=/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games LANGUAGE=de_DE:en LC_MESSAGES=de_DE.UTF-8 LANG=de_DE.UTF-8'
[+2.54s] DEBUG: Process 13148 exited with return value 0"

Which is weird, notices that it starts at "TH=..."

on my log I get "DEBUG: PAM returns environment 'PATH=/usr/local/sbin:/usr/local/bin:/usr/sbin:/usr/bin:/sbin:/bin:/usr/games LANG=fr_FR.UTF-8'"

so it seems somewhat you pam environment get mangled, that might be a different issues from the ones on this bug, could you restart your box in its current state and open a new bug using "ubuntu-bug lightdm", it should attach your log infos etc

what do you have in /etc/environment?

The "TH=" is weird, it should b "PATH="...