I'm not sure if this is the same issue or not, but I have the same issue in the 2.6.37.x kernels on a standard (not BFS, not PAE, not 64) kernel. I found that by removing the vga=791 (or whatever your setting is), X will start without a problem. I think there may be a problem here...
This workaround seems to work for me, but the rebooting (before X starts) screens are pretty lame.
AMD Athlon (2GHz)
Nvidea 440 SE w/AGP 8x, 128MB RAM, Nvidea 96 driver from repository
internet via dial-up (POTS)