I have upgraded to the latest precise kernel and can now use two screens
again.  More testing to do, though.

$ uname -a
Linux tenerife 3.2.0-29-generic #46-Ubuntu SMP Fri Jul 27 17:03:23 UTC 2012 
x86_64 x86_64 x86_64 GNU/Linux


** Changed in: xserver-xorg-video-intel (Ubuntu)
       Status: New => Incomplete

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https://bugs.launchpad.net/bugs/1029305

Title:
  Xorg freezes at login; Xorg.log contains "BUG: triggered 'if
  (!dev->valuator || dev->valuator->numAxes < 2)'"

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