I had the same problem, with generally similar solution:
(video: ATI Radeon Mobility X300)

./ati-driver-installer-9.2-x86.x86_64.run --buildpkg Ubuntu/jaunty
dpkg -i *.deb
aticonfig --initial -f
#reboot

Thanks for finger-pointing the package

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[ATI driver specific] Ubuntu hangs after usplash with gflrx 8.600
https://bugs.launchpad.net/bugs/346028
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