I have the same graphical chipset in my MSI S420 laptop, and I encounter
the same. I found that adding

Option "GARTSize" "128"

 in my Device section of /etc/X11/xorg.conf does make it work. However,
DRI does not initialize correctly. From /var/log/Xorg.0.log

(II) RADEON(0): [dri] Found DRI library version 1.3.0 and kernel module
version 1.27.0

(EE) RADEON(0): [pci] PCI failed to initialize. Disabling the DRI.
...
(EE) AIGLX: Screen 0 is not DRI capable

-- 
gutsy tribe 5 and daily 8-sep-2007 hang while starting up x on acer aspire 
5100-5455 laptop
https://bugs.launchpad.net/bugs/139241
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