It seems like launching another X server is too much trouble. I suspect that this is not necessary and would not solve your problems if you continue to run some bloated environment along side the other X Server.
Have you tried using a lighter environment such as OpenBox or Fluxbox?
It is possible that there is not enough Video Ram available if running some bloated thing like GNOME or KDE. If you are really desperate try the Ratpoison as it requires a mere 2MB RAM to run.

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