This happens with a stock version of kdmrc file.
I did "apt-get remove --purge kdm" and then "apt-get install kdm".
I am on feisty (7.04) currently, proposed-updates are enabled (if that matters).
I have experienced this bug both with radeon and ati drivers in xorg.conf. Now 
I am using [K]ubuntu under vmware 5.5.4 and have this issue with vmware driver 
in xorg.conf, so i believe it not driver related.

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Screen flickers when unused (vt8) session dies
https://bugs.launchpad.net/bugs/105422
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Team, which is a bug contact for kdebase in ubuntu.

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