1. How does your /etc/apt/sources.list
file look like?
2. Debian doesn't use runlevels like e.g. RedHat does. "Everything" runs in runlevel 2 already. Runlevels 3, 4 and 5 doesn't do anything additional.
If you wish to restart the display manager (kdm, gdm, xdm, ...), execute /etc/init.d/kdm restart
(replace kdm with gdm or xdm in that command if it is one of those you use)
If X isn't installed (or not quite properly as can happen when installing Debian 3.0 'woody'), execute apt-get install x-window-system
And for desktop/workstation purposes it is recommended currently to use Debian testing ('sarge')
instead of that nearly three year old Debian 3.0 ('woody').