I'm not sure what you do mean by kdm-startup in recovery mode. Recovery-mode for me does mean sulogin, and this causes that not everything gets loaded to enable sane kdm-login.
Does kernel-2.6.17-7-generic still boot into sane state?
Do you have vesafb (or another fb) for console enabled? If so, try to boot without it and tell me what is happening.
I'm not sure what you do mean by kdm-startup in recovery mode. Recovery-mode for me does mean sulogin, and this causes that not everything gets loaded to enable sane kdm-login.
Does kernel- 2.6.17- 7-generic still boot into sane state?
Do you have vesafb (or another fb) for console enabled? If so, try to boot without it and tell me what is happening.