The old x10 switches only work with incandescent bulbs. If you change bulbs to compact fluorescents or leds, they will flash continuously. That happened to me. There is a new x10 model that works with leds and cfls; I replaced the switch with the new one, and everything worked fine.
That's right. Even though the appliance modules have hard contacts, LEDs, CFLs and fluorescent lights are reactive loads causing a feedback which turns the module off - in some cases it can go to continuous oscillations. Circuits can be designed to fix this problem, but the old appliance modules are difficult to modify. The only reasonable modification I found is the removal of the the current sensing resistor inside the module. In most situations it fixed the problem. If not, connecting a small incandescent bulb almost always does the job.