I tested this on my Dell 600m laptop which uses an IPW2200, but could not 
duplicate the problem.  I successfully launched a second X session by going to 
tty1 and running
startx -- :1
A new X session appeared where tty8 would be, and both X sessions functioned 
normally, with internet capability.
Perhaps posting /var/log/Xorg.0.log (or other appropriate X log) might help.

I am using Ubuntu 8.04 Hardy Heron, x86 (i686) with 2.6.24-17-generic
kernel.

-- 
ipw2200 gdm hang
https://bugs.launchpad.net/bugs/236874
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