It's not clear for me whether the X server crashes/locks up or if it just does 
not enable the right mode/output. Would you be able to ssh in from another 
machine and see what the X server is up to (CPU usage, tracing etc)?
See also https://wiki.ubuntu.com/DebuggingXorg

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ati driver lockup (mobility radeon rv350)
https://bugs.launchpad.net/bugs/141551
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