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I gave kernel-mode setting a try today with xorg-server 1.6.1, xf86-video-intel 2.8.1 and kernel 2.6.31.
From the NEWS file:
The driver certainly will work best with an i915 module from a recent kernel (2.6.31) and with kernel-modesetting (KMS, specified by loading i915 with the option "modeset=1").
Here is the result I got.
Given that the Fedora people enabled KMS in 2.6.28, and now the kernel guys say that it's really fine in 2.6.31, I should probably give it a try next time around 2.6.34. ;)