I have Ubuntu 12.04LTS installed on a dual-booted machine (i5 dual core 8G ram) and it's been working fine, but today for some reason when I logged out and tried to log back in it is stuck at the login page, i.e. the mouse and the keyboard are not responding. The mouse is stuck at the top left corner of my screen, and I can do nothing but to turn the machine off. (I have been using logitech wireless mouse and keyboard.) I can not access the virtual console (Alt-F1 or Cntrl-Alt-F1) either!

Here is what I have tried so far:

1. Verified it is not a H/W problem since the mouse and keyboard work fine with windows7
2. Booted with ubuntu installation dvd and ran trial mode and mouse and keyboard worked fine.
3. Tried bypassing the login screen by booting into recovery mode and editing tty1.conf, but to no avail.
4. I moved .Xauthority .profile and .bashrc from my $HOME to another location so my login would proceed completely by system defaults. But this did not help
5. From recovery mode commandline used to dpkg-reconfigure to switch between gdm and lightgdm. This did not help either.
6. By the way, when in recovery mode as root from command line I mount the filesystem, all apps work fine. Python is Ok, octave is ok, vi is ok etc.

I have a feeling if I could only bypass the login screen, and automatically get into the desktop, I will be ok. But I haven't been able to accomplish this either.

I desperately need help please. Thank you in advance.

Update: So I tried to switch to lightdm by dpkg-configure lightdm. This at least brings me up to the classical linux commandline login prompt but without a gui. Should I install startx? Should I install ubuntu-desktop?