I have similar hardware (i945) which works fine with Xorg-7.5.
If it helps, here's the relevant sections of the xorg.conf I use: Section "Monitor"
	Identifier   "VGA"
EndSection
Section "Monitor"
	Identifier   "LCD"
	DisplaySize	260 162
EndSection
Section "Device"
	Identifier  "Card0"
	Driver      "intel"
	VendorName  "Intel Corporation"
	BoardName   "Integrated Graphics Chipset: Intel(R) 945GM"
	BusID       "PCI:0:2:0"
	Option		"Monitor-LVDS1" "LCD"
	Option		"Monitor-VGA1" "VGA"
EndSection
Section "Screen"
	Identifier "Screen0"
	Device     "Card0"
	Monitor    "LCD"
	SubSection "Display"
#		Viewport   0 0
		Depth     24
		Modes     "1280x800"
	EndSubSection
EndSection