Thanks for following up; I can also confirm here that the bug is fixed.
Closing.
** Package changed: xserver-xorg-video-intel (Ubuntu Karmic) => linux
(Ubuntu Karmic)
** Changed in: linux (Ubuntu Karmic)
Importance: Undecided => High
** Changed in: linux (Ubuntu Karmic)
Status: Incomplete => Fix Released
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[i965] External monitor detection broken when using KMS on Intel GM965
https://bugs.launchpad.net/bugs/393936
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