I can confirm this bug. I have a ATI 9600 and the X-Server completely hangs my 
system when starting. The screen blanks and I cannot use keyboard or mouse etc 
, only hard reset!
This happens with the live-CD (Dapper, Edgy) and with the configuration after 
install. 
It seems that the problem is dri-related, since disabling dri gets the radeon 
working - but 3D is of course very slow. Also vesa-driver is a solution.
This bug annoys me since 5.10 - and it has not been fixed since. 
In FC6 the card is set up correctly - no problems with the radeon driver there 
and 3D-performance looks much better there (I will check this). The FC6 
Xorg.conf is very short, no extensions loaded at all - but all software 
(tvtime, OpenGL sreensavers...) is working - even 3D desktop.
The fglrx-drivers worked fine for me in 6.6 and 5.10 (with dri, without 
overlay), I have not tried them so far in edgy.

By the way: The "Safe Graphics mode" on the live-install-CD doesn't help also, 
which seems kind of stupid to me. This should use the vesa-driver or ask the 
user, which driver to use...
The only way to install is alternate cd...

I don't know if this is related to the dri bug with the Radeon 7000 series
Regards, Peter

-- 
xorg DRI to hang with ATI 9600 pro
https://launchpad.net/bugs/37678

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