This bug is indeed fixed by the updated 2.7.0 driver at:
https://launchpad.net/~ubuntu-x-swat/+archive/x-updates/
However you MUST used TexturedVideo (again, the default anyway) so remove any 
XvPreferOverlay option from your xorg.conf.  When this option is false, it 
causes a different bug and X crash.  Works with DRI enabled too.

Can an update be pushed out?

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[i865] [Jaunty] - Can not start tvtime (since DRI is disabled)
https://bugs.launchpad.net/bugs/367546
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