Did anyone ever find a fix for this?

I've got the same problem (well, a minor variation, I don't get the
flashing cursor). I had no trouble with 6.06, and I just loaded a
fresh scorched earth install of 7.10 and suddenly no virtual consoles.

I spent most of the night trolling the Ubuntu forums, and learned that
this is a very common problem, both with and without the blinking
cursor. You think there'd be a simple fix that works for everyone, but
there were a multitude of fixes that worked for some combinations of
software/hardware, and not others.

I tried all the fixes that were understandable by me (some were *very*
terse), and none helped.

Does anyone know if I missed a general solution? There was a lot of
material on the forums, and I might have missed something.