I found that Ubuntu 7.10 would not recognize the Arduino Decimila board, despite the fact that lsusb was showing the FTDI 8-bit FIFO. After some research I discovered that I am not the first to have this problem. It is caused by Ubuntu assigning the FTDI to a braille device. The I got it to work by completely removing brltty with Synaptic.
This is a known issue for Ubuntu and is discussed this bug report: Bug #84139 “Arduino detected as braille device” : Bugs : brltty package : Ubuntu.