OK finally narrowed it down :
~$ uname -a
Linux Aspire-5670 2.6.32-19-generic #28-Ubuntu SMP Wed Mar 31 17:46:20 UTC 2010 
i686 GNU/Linux

In kernel 32-18 the problem starts

***************************
Last good kernel is 
~$ uname -a
Linux Aspire-5670 2.6.32-18-generic #27-Ubuntu SMP Fri Mar 26 19:51:10 UTC 2010 
i686 GNU/Linux


The fix for Bug #507148  caused this problem

-- 
[RV515] Guest session causes screen to flicker violently and session is unusable
https://bugs.launchpad.net/bugs/652934
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