Ok here's the skinny on the Safe Mode at least as far as it concerned my wife's Intercept. If there was no problem with the phone, you would ENTER safe mode by holding down the optical mouse button all the way through startup. My wife's ended up ALWAYS coming up in safe mode. So after talking with Sprint folks and doing research, we came to the conclusion that the phone THOUGHT the push button was being pressed during turn on so therefore the phone always came up in safe mode. Sprint tried a factory reset and everything. So we tried to actually USE the optical push button to navigate through some of the apps and windows and it did absolutely nothing. Basically, the optical push button is inoperative and the phone "sees" it as being pressed. The phone also would do things on it's own further reinforcing the idea that the button was being sensed as being pressed. So needless to say, we are having it sent back and repaired thanks to our warranty. Hope this helps...though none of it is good news.
Well, what do ya know? There IS a safe mode on the intercept. I sent mine into it by holding down the trackpad during startup like the OP mentioned. It just says "safe mode" in the corner. I didn't notice any other odd behavior though because of it. I also did it immediately after wiping back to stock, so maybe it prevents 3rd party or market apps from running?