I have the same result on my HP6735b with a AMD RS780M/RS780MN (Radeon HD 3200) 
using ati or radeonhd as driver.
On boot up I see non sense on the screen. The I can see the log on screen and 
the computer freeze. Sometimes just on begin of showing the screen, sometimes 
after selecting one user...
Starting with vesa a default works fine, just with the wrong resolution.

Erni35

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[Lucid] KMS doesn't work properly with old Radeon cards
https://bugs.launchpad.net/bugs/509273
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