This problem is also present on IBM Thinkpad T20 series. I had to change
to the VESA driver, on 7.04 (Edgy) as well as 7.10 (Gutsy).

In both cases, I installed using the Alternate-CD

I changed to VESA by booting into text mode and I then gave the command:

sudo dpkg-reconfigure xserver-xorg

-- 
installer fails to create usable xserver config
https://bugs.launchpad.net/bugs/155245
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