I had the same problem, the system would hang just after that line, which as I figure it has nothing to do with the actual problem: the display manager.
I first logged in to the system going to another TTY screen ctrl-alt-f2
I first did the update and upgrade routine and after reboot it would still hang.
sudo apt-get update
sudo apt-get upgrade
After I tried doing a fix on the install by way of this command:
sudo apt-get install -f
still it didn't work it continue to hang after reboot.
In fact it wouldn't let me shutdown manually, so after searching for more help
I tried a reconfigure on the debian packages with this command
sudo dpkg --configure -a
It still just didn't work
That's when I found that the problem was related to de display manager
Link: http://www.lamantia.org/archives/148
So I tried this other suggestion on replacing the default display manager with this command:
sudo apt-get install gdm
contrary to the person recommending this my problem still wasn't fixed.
How ever it did allow me to login with the Lubuntu GUI, when it entered the GUI I had lost the apps from the launcher, at least dash and Firefox were still there.
But I didn't care for this GUI, so I looked for another solution and I found
this link: How can I add a desktop/GUI to a command-line Ubuntu installation?
at How can I add a desktop/GUI to a command-line Ubuntu installation?
Then I realize that if the problem is the display manager what I really wanted back was my Ubuntu desktop, so I remembered that I one before installed the GUI Ubuntu desktop from the command line in a server setup, since what I wanted to do is save my actual settings because like others they are of particular nature or need it would install the GUI and leave every thing else de ssh, the ftp the other setting unchanged.
So I tried this command:
sudo apt-get install ubuntu-desktop
After a while it finished and I rebooted, after trying to do shutdown now and not actually shutting down I had to do a soft reset with Ctrl-Alt- Del. And to my surprise it WORKED!.
When it booted back up again it went in to the GUI, found my login accounts and allowed me to enter again.
Of course the apps were not in the launcher, but they are installed so I just used dash to prompt them, launched then and when running the app appears in the launcher so I just right click the mouse and locked them to the launcher. Each of them ( LibreWriter, Calc, Impress, sys Setting, Ubuntu Software Center and Ubuntu 1), I got them back and work as before.
Also I have shutdown the GUI as normal and rebooted and it works fine now.
And I didn't loose any other settings.
Hope it works for you guys. Sorry I ran trough the whole process I did.
But maybe one instruction alone doesn´t work unless you go trough them all.
You guys try it, maybe all you need is to just do the last one the
sudo apt-get install ubuntu-desktop
But if you try it and it doesn't work. Well go to the first one, which makes sense update and upgrade.