I'm experiencing the same behavior with version 2:2.7.0-1, but X is only broken with kernel 2.6.29-1-686. I get a correct display with kernel 2.6.26-2-686.
I attach X logs for both kernels.
Xorg.2.6.26.bz2
Description: Binary data
Xorg.2.6.29.bz2
Description: Binary data