I have exactly the same problem with my HD4670.  I've been commenting
about this on bug 387013 but I'll start interacting on this one instead.
Let me know if there's anything useful I can post about it (my xorg log
file is posted over there).

Note that I've tried Bryce's PPA which doesn't seem to help.

-- 
[Karmic] Xorg crash after login. Returns to gdm which then hangs.
https://bugs.launchpad.net/bugs/427101
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