Running An AMD Athlon XP 2200+ with an ATI 9800XT in AGP on a Gigabyte
7VAXP Motherboard with VIA chipsets, I have the same problem.

Everything worked fine with the "ati" driver.  I upgraded to fglrx
without rebooting, and everything still seemed fine.  I added a
"vga=795" line to my kernel, and rebooted, and suddenly it was broken.
Now it just hangs when it should be starting X, and I have no terminals.

Removing the "vga=xxx" line from my kernel fixed nothing.
Changing the "fglrx" driver back to the "ati" driver in xorg.conf gave me back 
X, and it doesn't hang on booting anymore.  I also have my terminals back.

This was with the default, edgy-distributed, fglrx driver.

-- 
[edgy][regression][rv280] black screen and full freeze when X starts
https://launchpad.net/bugs/67487

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