check out /var/log/XFree86.log and see what it says after you change the color depth and try to startx. I can't think of any reason why it would act that way, but then again, I really don't know much about hardware period.
You can definitly upgrade your XFree86 if it comes down to that. The way I do it is by compiling from the sources.... I would recomend that over using a RPM. XFree86 only depends on freetype, so I don't think that you should get that many dependancies. and YES, changing your X server shouldn't mess with anything else.
here's a link to the LFS docs on how to install XFree86.... It should work for you too (you should edit that hosts.def file to fit your system.... or just don't use it at all)