This happened to me after I tried putting a skin onto OS X that wasn't compatible. After searching for answers for months, (yes, months) the only solution I could find was backing up my user folder and wiping the disk and reinstalling X. I have OS 9 and X on different partitions, so backing up was easy. If you have both on the same partition, try using a startup disk to boot into 9 and backup, or holding down the option key after the startup chime if you have a "new world" mac.
The blue screen came up after login and all the directory services started. Once X reached the finder, the finder would appear for a few seconds, but then a blue blanket came over the screen. The mouse would remain atop however. If that is similar to your problem, do as I suggested. BTW, repeated calls to Apple tech support were of no help, though they tried.