Try to look in /var/log/Xorg.0.log, after booting the pae kernel, and after booting the non pae ....
I'm also using a pae kernel, (nvidia card), without issues ...
Hmmm... here's what I found in /var/log/Xorg.0.log:
for the 2.6.38.8-pclos3.bfs:
[ 12.258] (--) Depth 24 pixmap format is 32 bpp
[ 12.258] (II) Loading extension ATIFGLRXDRI
[ 12.258] (II) fglrx(0): doing swlDriScreenInit
[ 12.258] (II) fglrx(0): swlDriScreenInit for fglrx driver
[ 12.259] ukiDynamicMajor: found major device number 251
[ 12.259] ukiDynamicMajor: found major device number 251
[ 12.259] ukiDynamicMajor: found major device number 251
[ 12.259] ukiOpenByBusid: Searching for BusID PCI:1:5:0
[ 12.259] ukiOpenDevice: node name is /dev/ati/card0
[ 12.259] ukiOpenDevice: open result is 13, (OK)
for the 2.6.38.8-pclos3.pae.bfs
[ 12.122] (--) Depth 24 pixmap format is 32 bpp
[ 12.122] (EE) fglrx(0): atiddxDriScreenInit failed, GPS not been initialized.
[ 12.122] (WW) fglrx(0): ***********************************************************
[ 12.122] (WW) fglrx(0): * DRI initialization failed *
[ 12.122] (WW) fglrx(0): * kernel module (fglrx.ko) may be missing or incompatible *
[ 12.122] (WW) fglrx(0): * 2D and 3D acceleration disabled *
[ 12.122] (WW) fglrx(0): ***********************************************************
[ 12.122] (II) fglrx(0): FBADPhys: 0xc0000000 FBMappedSize: 0x10000000
[ 12.186] (II) fglrx(0): FBMM initialized for area (0,0)-(1280,8191)
any ideas how to fix it?