I had the same issue with a dell desktop machine containing an ATI rv610 graphics card. If found that I could get the xserver working by going to the console and editing the xorg.conf file to explicitly set the driver to "radeonhd" instead of the default "radeon". I do not know why the radeon driver is setting the screen into standby, the xorg logfile looks normal in both cases.
I had the same issue with a dell desktop machine containing an ATI rv610 graphics card. If found that I could get the xserver working by going to the console and editing the xorg.conf file to explicitly set the driver to "radeonhd" instead of the default "radeon". I do not know why the radeon driver is setting the screen into standby, the xorg logfile looks normal in both cases.
so short version, radeonhd works, radeon doesn't.