Hello All,
I have had a similar experience running 11.2 on an Asus 1001P.
With 11.2 + all updates, my display ran at the proper resolution of 1024x600, but I was not happy with the performance of fbdev (framebuffer).
Short answer: update to kernel 2.6.34-8
I simply installed from the factory snapshot …
Discussion:
Before updating the kernel, I re-built the newer xorg (all of it … yuck!) to obtain the 2.11 version of video-intel. The system refused to load the driver; it would fail with the message “(WW) VGA arbiter: cannot open kernel arbiter”.
The 2.6.34 kernel provides a module, drm_kms_helper, that seems to make everything ok. Running this kernel, X auto-magically loads the i915 driver. Simply updating the kernel (not installing my re-built X)improves video performance significantly. So far … it is stable … 
Examples: 300+ fps in glxgears vs. 60; better appearance (subjective); smoother video playback
Running 11.3 milestone 7, hwinfo --gfxcard also reports that driver i915 is loaded and being used. From reading various forums and docs, I expected the correct driver to be “intel”. I don’t think we have seen the new driver in action yet!
Have a lot of fun …