I've seen a similar problem on my iBook 500, Dual USB. I created the problem by deleting a user that I shouldn't have. I solved it by booting in single user mode (to the prompt) and running a perl script to fix permissions (which seem to be causing a lot of OS X problems).
The perl script was provided by a friend I discovered in Apple's Discussion areas, and I THINK I transfered it to my machine from a roommate's Linux box, though I forget how. I keep the script on my hard drive now, just in case the problem ever occurs again.
If anyone's interested, drop me an e-mail and I can send you the script. If you have it on your computer, fixing is as follows:
1) Reboot with command-s held down to go into to single user mode.
2) Assuming you put the script in the Applications/Utilities folder, type "cd /Applications/Utilities" at the command prompt and press return.
3) Type the command "perl chkUGM" and press return.
4) Reboot when the script is finished running by typing the command "reboot" at the prompt and press return.
Not the easiest, but not unachievable, hold-your-tongue-the-right-way and pray either.
Apple and The Blue Screen of Death, the Truth