As stated by the last few lines of the error message, it's possible that your hosts file has been corrupted somehow. If you could post the contents of your /etc/hosts file, we could probably help you figure out what to do.

Another possiblity is a hostname conflict. Have you changed your hostname recently? The XServer communicates with itself over the loopback interface. If you change your hostname, but don't change /etc/hosts accordingly, the Xserver has a fit because it doesn't know what IP address to talk to. If you edit your /etc/hosts file to match the change in hostname, the problems go away.