I've uploaded 6.12.0 to Jaunty a little while ago (and corresponding
kernel fixes were put in last week) which I believe fixes this issue.
Can you please test on latest Jaunty and confirm the issue is gone?

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[HD 3650] cannot start gnome X in intrepid (gray screen with horizontal thin 
flashing black lines)
https://bugs.launchpad.net/bugs/272406
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