Thanks for the valuable tip. I was able to reconfigure the X Server. But, when I tried to run X Server manually, I got the classical "Could not find font Fixed" error. I checked font dir and verified all files. It was OK.
After scratching my head couple of times, I found that my root directory is 100%. I had a 4GB size xession_errors file. Once i deleted that it worked fine.
Thanks once again,