restarting xserver (or switching back to ctrl+alt+F7 from ctrl+alt+F1-6) hangs/crashes/freezes system with fglrx

I have a HP Compaq nx6325 with ATI Radeon Xpress 200M and my KDE (or X.org) completely freezes when I try to shutdown or restart the system (and then I can only power off my laptop).
The issue is not present when:
a) I switch from fglrx to ati driver
b) I restart the X server (ctrl-alt-backspace) before logging in.
But switching to consoles 1-6 works fine.
I'm using vga=791 too.

Is it possible that I could be experiencing two bugs as I see some people with just half of what I am explaining. One bug not allowing me to view the terminals alt+ctrl+F1-6 on or after the login screen (causing my monitor to go into standby) and the other bug causing a crash when switching back to gde or restarting the xserver.

No proof of this, just throwing it out there as an option, if it helps.

Update:

No problems using DVI rather than VGA (same monitor & graphics card)

Still, this is not a fix for me (degraded quality is clearly (or unclearly as it were) visible), just a temporary work around.

Please let me know if I can help any further.

Sorry, my mistake:
No problems using *VGA* rather than *DVI*.

This is reported fixed by ATI in the newer fglrx:

 - Resolved issues since 8.34.8:
      + In certain AGP graphics cards the system no longer ceases to
        respond when switching from the X-Server display to a text console.
      + The screen no longer turns black if the X-Server is terminated
        from the text console. This condition was known to occur only on
        certain laptop configurations. [ATI# 737-26829].
      + Logging out of a session to the graphical login manager no longer
        crashes the Xserver

I've packaged the fglrx driver, and put the debs up for testing on Gutsy:

    http://people.ubuntu.com/~bryce/Testing/

I notice in the changelog, that the new fglrx has fixes for this exact problem. Josh Andler has this bug with fglrx and has confirmed that with these debs, it goes away. Still, additional testing on Gutsy would be much appreciated.

These are the packages I installed in my tests: fglrx-control, xorg-driver-fglrx, fglrx-kernel-source, linux-restricted-modules-common, linux-restricted-modules-2.6.22

Also turn off Composite if you have it on (fglrx doesn't support it)
fglrxinfo and glxgears are useful to verify its working

This bug was fixed in newer versions of fglrx, which is now available
in Gutsy.

There are no plans to add fglrx 8.37.6 to Feisty officially, but I've
created .debs for Feisty users needing this fix. These are available
at http://people.ubuntu.com/~bryce/Testing/fglrx-8.37.6-Feisty/
Despite being unofficial, please feel welcome to report new bugs with
these packages to launchpad.

Please help spread word and help fellow users in installing it!

I wish I could give more insight on similar problem related to system-boot.

I actually never trust linux distros though I like working on linux box
because they are all peices joined together which somehow work
and work well most of the time but not always. This is the only thing why I have to rely on windows,
because after upgrading system I am never sure it will work like before atleast,
although normal expectation should be work better.

On my Dell notebook, Ubuntu Drapper works like charm, with old fglrx and older version of xorg.
I have absolutely no complains about it. so I decided to upgrade stepwise, I never do mistake of
trusting linux upgrades. I upgraded drapper to edgy and edgy to feisty , pretty normal process.

I will just give boot times Drapper - 40- 50 secs and Feisty 210-230 secs. Well that is not all
Drapper shows actually what it is doing on boot starting services all those OK and failed
appearing in appropirate place, progress nicely moving.

Feisty is absolute trouble, it make me wait more almost 3 and half mins on a BLANK BLACK SCREEN !!!
No progressbar , no beautiful ubuntu logo. Even windows odes not do such traversary atleast it show
blue screen with some jibbrish and you know better format and reinstal.

How come normally user is suppose to know , wait for nearly four minutes on Black Screen like your PC is dead
and than Ubuntu will start working.

And the reason , Xorg's latest version does not support ATI Drivers properly , how the hail did previously work??
Since it was working what was the need to touch it, just to break it?

DannyW do you see a black screen? I think your system is not crashing just wait for neraly
4 mins and Xorg will probably start.

All that I expect for peoples trust in Ubuntu is it should work best possible out of box.
I am programmer, I can look around for solution and see what will work and what not.

I am talking about people, who are not nerds and not programmer they like their upgrades
to work normally , Ubuntu community cannot blame ATI everytime,
something with graphics breaks.

Most of the people are also unaware what is a graphic card? Do you think them being enough careful
weather to buy ATI or nVidia or GeForce. They just get what their vendor sales them.