I have an i386 installation of Hardy on a laptop that use opensource ATI
drivers and it works fine actually.

Can you also look if you use some non-default options like "vga=" in
/boot/grub/menu.lst and if the content of your /etc/usplash.conf file is
the same of your actual screen resolution when using X?

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corrupted shutdown screen
https://bugs.launchpad.net/bugs/221074
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