Which Hardy LiveCD do you have tested? According to your log the vesa driver 
was used which makes sense because of the safed graphic mode so the Intel 
driver could still have this issue.
What happens if you just start the LiveCD with "start or install Ubuntu" 
without changing anything except the keyboard or language?

** Summary changed:

- 7.10 Release candidate starts with black screen / blue screen
+ X starts with black screen / blue screen (i965G)

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X starts with black screen / blue screen (i965G)
https://bugs.launchpad.net/bugs/153188
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