You mix up three different problems here:
1. freeze during boot
2. X not starting in the internal display but on the external VGA output.
3. safe graphics mode not working.

1. try adding the options "irqpoll" or "noapic nolapic" to the boot line in the 
CDs boot menu, check for bugs that relate to that.
2. that's https://launchpad.net/products/xserver-xorg-driver-ati/+bug/22985
unless you don't have a laptop, or a gfx card with only one output port.
3. that's https://launchpad.net/distros/ubuntu/+bug/67405

I suggest marking this one as closed and add comments to the bugs already 
filed. For number 1. check if there's bug reports for that already. I used to 
have a similar problem, but that was fixed in the past.
Changing the driver in xorg.conf from ati to radeon usually doesn't help. You 
might want to utilise adding the "MonitorLayout" option in xorg.conf as 
described in the original bug report though. Alternatively, installing the 
non-free fglrx driver is a workaround likely to work.

Regards,
Dominik

-- 
X in 6.10 ISO Cd installer doesn't work for ATI card
https://launchpad.net/bugs/68433

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