After updating OS X from 1.2.8 to Panther, the upgraded X11 stopped working. It would flash and then disappear. Looking at the console, I found the solution:
XFree86 Version 4.3.0 / X Window System (protocol Version 11, revision 0, vendor release 6600) [DRI] screen 0 installation complete Screen 0 added: 1152x768 @ (0,0) /Users/*****/.xinitrc: /Users/*****/.xinitrc: is a directory Quitting XDarwin...As you can see, I had a Folder as .xinitrc. Removing that folder solved the problem.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20031101115745485