I have encountered the same problem on my IBM Thinkpad X40 after upgrading 
Karmic to Lucid Lynx.
My display adapter :
description: VGA compatible controller
product: 82852/855GM Integrated Graphics Device

I can confirm that enabling KMS fixed the freezing and now I am able to
boot in a normal manner.

My setup is a bit different though, the i915.modeset=1 gets passed to the 
kernel by GRUB while booting. This can be acheived by adding 915.modeset=1 to 
the grub boot options after pressing 'e' in the GRUB menu.
To make these settings persistent edit /etc/defaults/grub and run grub-update.

-- 
[i855] Lucid Freeze shortly after X startup (needs KMS blacklist?)
https://bugs.launchpad.net/bugs/511001
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