Eliminate and reduce overlapping date ranges

I have a set of date ranges consisting of both partially and fully overlapping dates, like this:

UserID  StartDate   EndDate 
======  ==========  ==========
1       2011-01-01  2011-01-02  <- A
1       2011-01-01  2011-01-10  <- A
1       2011-01-08  2011-02-15  <- A
1       2011-02-20  2011-03-10  <- B
2       2011-01-01  2011-01-20  <- C
2       2011-01-15  2011-01-25  <- C

Using T-SQL, I would like to create a new set of data, per user, with eliminated overlapping data, extending ranges and removing redundant data where needed, resulting in something like this:

UserID  StartDate   EndDate 
======  ==========  ==========
1       2011-01-01  2011-02-15 ('A', three rows combined, extending the range)
1       2011-02-20  2011-03-10 ('B', no change, no overlaps here)
2       2011-01-01  2011-01-25 ('C', two rows combined)

Cursors are fine if needed, but if I can do without them that would be even better.

Answer

For SQL Server 2005+

-- sample table with data
declare @t table(UserID int, StartDate datetime, EndDate datetime)
insert @t select
1, '20110101', '20110102' union all select
1, '20110101', '20110110' union all select
1, '20110108', '20110215' union all select
1, '20110220', '20110310' union all select
2, '20110101', '20110120' union all select
2, '20110115', '20110125'

-- your query starts below

select UserID, Min(NewStartDate) StartDate, MAX(enddate) EndDate
from
(
    select *,
        NewStartDate = t.startdate+v.number,
        NewStartDateGroup =
            dateadd(d,
                    1- DENSE_RANK() over (partition by UserID order by t.startdate+v.number),
                    t.startdate+v.number)
    from @t t
    inner join master..spt_values v
      on v.type='P' and v.number <= DATEDIFF(d, startdate, EndDate)
) X
group by UserID, NewStartDateGroup
order by UserID, StartDate

Notes:

1. Replace @t with your table name