I've got the same problem. The display freezes as KDM starts up. The
mouse pointer can still be moved, but I cannot use Ctrl+At+F* to switch
to console.

Version 6.7.195+git20071026-0ubuntu0tv  from
http://ppa.launchpad.net/tormodvolden/ubuntu/pool/main/x/xserver-xorg-
video-ati did not fix the problem. Reverting back to 6.6.3-2ubuntu6 from
fiesty did get my desktop back up and working.

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ATI Radeon 9200 crashes with Gutsy driver
https://bugs.launchpad.net/bugs/139210
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