I have the same problem here.

The system is a fresh install of Kubuntu 6.06LTS, patched to the latest
available package set. The hardware is a Supermicro P6DBU motherboard
with 2xP3/750 and a Sapphire ATI Radeon 7000 video card in the AGP slot.
When I use the -386 kernel, everything works fine, but as soon as I
switch to -686 and SMP, X always locks up somewhere after KDM coming up.

It cannot be a hardware problem, the machine is rock stable. On another
partition I have a Debian Sarge with kernel 2.4.32 (hand-compiled) and
it runs well with DRI turned on, in SMP mode.

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system freeze when using ati radeon 7000 with xorg "ati" driver
https://launchpad.net/bugs/16873

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