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I'm having a very similar problem with Gentoo. I'm using gdm instead of xdm and can run a number of window managers; kde, gnome, windowmaker, fluxbox. No matter which window manager I use, when I log in using a user account, I can't bring up an xterm (or any other term for that matter) But, everything is fine when I log in as root. When in a root xterm, I can su, or su -m, to my user account. Echoing PATH when logged in as a user shows that my PATH is not set according to the values in /etc/profile. If I source /etc/profile, everything is okay.
My next plan is to try creating a .profile file in my user directory and having it source /etc/profile. I'll let you know if it works.
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