I have a radeon x800gto card running with the xf86-video-ati-6.6.3 driver.
Direct rendering works but is too slow when running google-earth compared to the ati-proprietary driver (8.33.6) I used
in Slackware 11. So I tried the newest ati driver 8.38.6. It works, framerates are fantastic, everything looks good, but
leaving the x-session (logout of kde-session or just sudo telinit 1) freezes the system. Even logging in from another
machine via ssh isn't possible anymore. I have to switch off and run a filesystem check after that :-(

Is it a driver issue? I had the same problem with a former version of the ati driver (don't know the version anymore)
in Slack 11 but that was a known bug and fixed with a newer version after a while.

I'm using driver 8.37.6 with a custom 2.6.21.5 kernel and everything works well.
Try this driver instead. I've had similar issues in the past with ATI and I think the drivers are very picky with respect to the kernels you run them on. I still run 2.6.19.2 on a slack 11 install and need to use the 8.33.6 driver.

The other option might be to move up to the 2.6.22 kernel.

HTH

yes, most likely a driver issue. the ati driver had problems in the past' that's why 12.0 ships with two different version..

Before 8.33.6 came out I had lots of trouble with those drivers.
Now it seems to begin again. Time to think about Nvidia...