I have the same problem on a brand new HP DX 2250 machine running Ubuntu
8.04

I commented out the starting of X and I can login via a tty but when I
startx it hangs.

Using the Live CD - what is funny though, if this helps. when it runs
from the live CD it show the X based login prompt OK and then when it
logs it it must try to change the video mode and thats when it crashes,
then loops back to the login prompt.

is there any whay of keeping it in that mode, or stopping it from re-
initailising.

Also what you try to start X manually you get the grey screen in the
correct mode, with the X then an arrow cursor, then when it goes to the
vertical bar cursor it then crashes.

-- 
live CD loops between login and desktop on ATI Xpress cards - compiz crashes 
Xorg
https://bugs.launchpad.net/bugs/188660
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