So I just removed usplash from my jaunty installation and installed splashy. The problem was that when I rebooted, splashy did not start and the verbose showed this error:
Splashy ERROR: Connection refused
So after searching the web for fixes and nearly cracking my head, I found the problem.
When splashy is installed, it adds itself to the boot parameters of the kernel but it forgets to add the video mode. So after installing splashy, the kernel boot line looks like this:
kernel /boot/vmlinuz-2.6.28-11-generic root=UUID=d3cef047-ce4f-434e-8091-9236d5785f61 ro quiet splash
All you have to do to get splashy to work is add vga=792
So after edititing /boot/grub/menu.lst, the kernel boot line should look like this:
kernel /boot/vmlinuz-2.6.28-11-generic root=UUID=d3cef047-ce4f-434e-8091-9236d5785f61 ro quiet splash vga=792
Save the file and reboot and splashy starts as is should.
Note: You need root privileges to edit the boot menu.