Same problem here. Xubuntu Feisty i386 installed on a Qemu virtual
machine using the alternate CD. Launching XFCE Terminal causes X to
restart. It works fine if XFCE is not running (for example running
FVWM). The 16 bits video workaround works fine too.
Attached .xsession-errors, and messages, syslog and Xorg.0.log in
/var/log. XFCE Terminal was invoked at 11:39:30.

I suggest change the status to confirmed and  importance to as last
medium as newbbies hardly can figure out how to launch a terminal
emulator.

** Attachment added: "/var/log/messages"
   http://launchpadlibrarian.net/8744821/messages

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Attempting to open terminal cause restart
https://bugs.launchpad.net/bugs/81512
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