I found a workaround on the ubuntu forum.
(http://ubuntuforums.org/showthread.php?t=579761)

1. Install latest version of nvidia driver (I'm using v173.14.09, installed 
with EnvyNG)
2. sudo gedit /etc/modprobe.d/options
3. Add the following line:
options nvidia NVreg_RegistryDwords="PerfLevelSrc=0x2222"
4. Save and restart

This has been working for me for the past 3-4 days.

The problem seems to be caused by the powermizer feature which
dynamically switches the clock speed of the GPU and video memory. The
steps above locks the card into the highest clock speed ("Performance
Level 2" - GPU:350mhz, Memory: 700mhz). I then manually underclock 3D
clock frequency to GPU:250mhz/Memory:500mhz. It seems like anything
lower and it becomes unstable again.

In Windows, I encounter the same problem. By default the Window's driver
I use turns this powermizer feature off. When I turn Powermizer on, i
get the same freezes as in Ubuntu. So I'm inclined to believe this is an
issue with the hardware itself. Something to do with this particular
geforce go 7300 card and dual core CPUs.

My system is Acer Aspire 5583 (Geforce Go 7300, Intel Core 2 Duo T5500
1.66mhz) running Ubuntu 8.04.

-- 
Random NVidia Proprietary Driver Lock-Ups with dual core + 7300
https://bugs.launchpad.net/bugs/145112
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