Thanks Carlos, it did work but....
when I did 'sudo startx', an empty desktop was being displayed for a long time so I did ALT+CTRL+F1 and I found that it was stuck at "Loading extension GLX".
Then I did a reboot and the desktop was loaded and I was able to login.
So every time for loading the desktop I need to reboot as startx doesn't work. Would be great if I could get that working.
I tried increasing the video memory to 64MB and turned on the 3D acceleration but that didn't help.