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[Chris Bainbridge <chris.bainbridge@xxxxxxxxx>]

I'm not sure if this the same bug I'm seeing, but it sounds similar.
Using a Thinkpad T42p with ATI M10 NT/FireGL Mobility T2 chipset.

If I have xserver-xorg-video-vesa installed and "splash" set in kernel
command line arguments then I will get the "Ubuntu is running in low-
graphics mode" error message and be unable to continue further. Solution
is either to remove xserver-xorg-video-vesa or to remove "splash" option
from kernel command line arguments. I haven't tried installing gdm.

-- 
after recent update which included xorg, xserver etc causes low-graphics mode error at start
https://bugs.launchpad.net/bugs/491483
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