For the first question, it is just a spacing issue there. It should read logout. For the second question, I made the text that small on purpose assuming that the screen that will display it will make it bigger since we are working with 800x600 on GRUB. Therefore, the screen that shows it, generally bigger, will make the font be bigger. At least that's what I assume.
Overall I like the mockup very much. It has some very good idea.
Some comments and suggestions below:
Can you make a mockup for how the highlight/click effect would look? In plasma and the app theme we use a blue effect. However that would not look very well on the blue background.
Concerning keyboard layout etc... would a pop up called like "advanced options" instead of "desktop session" be a good thing? I mean as an alternative to hide both beneath without breaking design?
Desktop session definitely is advanced.
For keyboard layout, it depends. In most cases, it's simply not needed at all, but if for someone reason someone has made the system default layout not the one which is printed on the keyboard and then someone else wants to log in, it's crucial.