In the 2.6.32-19 kernel a patch went it to disable lid switch usage for
all gpus of both i915 generation 2 and 3 [1]. Please test this kernel
out to see if it fixes your issue.

Thanks

[1] http://kernel.ubuntu.com/git?p=ubuntu/ubuntu-
lucid.git;a=commitdiff;h=02cf17d29ec2b659b7e058318721a1ad980d9b99;hp=2410233263bd7ccd4bd13b15e98f298684171ba1

** Changed in: linux (Ubuntu)
       Status: Confirmed => Incomplete

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[i945gme] Ubuntu falls back on vesa driver (no screens)
https://bugs.launchpad.net/bugs/507196
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