I had have the same problem. I use the instruction at the release notes:

-->
Blank screen with some ATI hardware

People with ATI display adapters may get a blank screen when loading X due to 
the driver being unable to initialize certain hardware. Upstream is working on 
it, and hopefully we'll be able to release an update for 7.10 soon after the 
release. In the meantime, add 'Option "LVDSBiosNativeMode" "false"' to the 
driver section of xorg.conf. Bug #132716
<--

After i change the xorg.conf i could start with a resolution of 800x600
pixels. Then i use the grafical tool to chance the resolution to
1280x1024 pixels, the normal resolution of my display.

cheers
Sascha

-- 
ATI Driver Gets Black Screen on Radeon 7500 Mobile (Regression)
https://bugs.launchpad.net/bugs/132716
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