I experienced the same, but on an Acer Aspire One 110L (i945GME) and I'm
pretty sure I reported it, but now I can't find the bug report ...
Anyhow, this last update (kernel and xserver-xorg-video-intel) fixed
this issue for me.

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Allows only 800x600 resolution on IBM Thinkpad X40
https://bugs.launchpad.net/bugs/454557
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