I have the same problem with an Ati X1200 integrated in chipset AMD RS690M.
I have copied the xorg file generated by the ubuntu 7.10 livecd, and it works 
now.
I think the problem is not in vesa driver, beacuse of the output in xorg.log
I attached my log.

** Attachment added: "Xorg.0.log"
   http://launchpadlibrarian.net/11075475/Xorg.0.log

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[ATI X1300] Could not generate /etc/X11/xorg.conf.failsafe
https://bugs.launchpad.net/bugs/174434
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