Fixed for my box.  Here is the procedure:

1. On boot, enter the grub menu and add this to the kernel line, vga=ask, e.g:
  kernel  /vmlinuz-2.6.27-9-generic 
root=UUID=61deb805-3f3b-47b3-9349-8c43ae3c3aa9 vga=ask ro quiet splash
2. You will be presented with list of available modes.  Select one that is 
appropriate for your screen.  A mode for your native resolution many not be 
available, e.g. I do not have a mode for 1920x1200 shown.  I selected VESA mode 
791
3. Continue boot; usplash was shifted, but otherwise looked ok.  After boot, 
make sure your virtual terminals look ok (i.e. ctrl-alt-f1 and make sure the 
text looks good!).  If not, return to step 1.
4. Run usplash -x1024 -y768.  This step is probably not necessary.
5. Edit /etc/usplash.conf and set the resolution to 1024x768 (in this example) 
or whatever your resolution is.
6. Edit /boot/grub/menu.list, update the kernel line for your boot image to 
include the vga line.
  kernel  /vmlinuz-2.6.27-9-generic 
root=UUID=61deb805-3f3b-47b3-9349-8c43ae3c3aa9 vga=791 ro quiet splash
7. Run update-initramfs -u
8. Reboot

It appears that on some installs, usplash is configured for an
unsupported vga mode.  Potential steps to correct on installation:

1. Scan for available vga modes and select one that is available and 
appropriate [unsure of the heuristics here :( ]
2. Set resolution to mode in /etc/usplash.conf
3. Run update-initramfs -u to update initial ramdisk image

-- 
[Intrepid] Usplash Screen Corruption
https://bugs.launchpad.net/bugs/243682
You received this bug notification because you are a member of Ubuntu
EEEPC, which is a direct subscriber.

Status in “usplash” source package in Ubuntu: Fix Released
Status in usplash in Ubuntu Intrepid: Fix Released

Bug description:
Binary package hint: usplash

Usplash Screen Corruption causes a flashing red screen.


Ubuntu Intrepid Ibex Alpha 1 on the Asus EeePC 701 with integrated Intel GMA 
900.

On shutdown, the screen flashes with corrupted graphics, before flashing red. 
Finally, the Ubuntu shutdown progress bar appears before the machine turns off.
(see attached video (H.264)).

This is not 100% reproducible, but happens on the majority of shutdowns.

See also bug 245849, about scraps of the progress bar being repeated on the 
startup screen.

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