So you're out of luck !
You didn't say much about your display with the lastest froyo
version...
Unless Chih Wei pushed a new debugged version I'm not aware of, FRG83G
ID (latest Froyo version) should have mesa issue with this chipset, as
explained above.
So you have to downgrade mesa with the older version.
The howto is here :
http://groups.google.com/group/android-x86/browse_thread/thread/e61630d85606efc3
At first, no need to downgrade the kernel. See if that solve your
problem with graphical issue.
Then downgrade the kernel to 2.6.35 and get my tar ball for the aspire
1000s serie to get the multitouch drivers and test if that solve your
touch panel issue.
But don't forget to backup your whole tree before applying any
change !!!
Tell me how it works after that...