I have the same problem on a Dell Optiplex 170L. I was putting together
this computer for a friend of mine who does not have a computer at all.
Using the Ubuntu 7.10 Intel x86 live CD, I ended up booting the live CD
in Safe Graphics Mode. After installation, I restarted and found that it
did not detect my graphics card correctly. After configuring the drivers
and resolutions using the handy "configure" button, I was able to see
the login and desktop correctly. I thought maybe that was the end to my
problem, but I was wrong. After installing all the Ubuntu updates and
restarting, the same thing happened again. It seemed to have reset
itself again to the settings I had before I changed them. Using the
"Start-up Manager" program I found in the Add/Remove, I changed the
resolution of my Startup Splash Screen to 1024x768. I also saved the
configuration of the Graphics card inside the Screens and Graphics
application found in the System->Administration menu. I used the Intel
i810 driver and set my resolution to 1024x768 at 75 hertz.

** Attachment added: "My Xorg.conf File"
   http://launchpadlibrarian.net/11087534/xorg.conf

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[Gutsy Beta] 82865G Integrated Graphics Controller Not Correctly Identiified 
during setup
https://bugs.launchpad.net/bugs/146284
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