Video is Intel GMA500 "Poulsbo" with LCD resolution of 1280x800.
X failed to start:
There is a part of /var/log/Xorg.0.log
...
[ 84.803] (II) VESA: driver for VESA chipsets: vesa
[ 84.803] (II) FBDEV: driver for framebuffer: fbdev
[ 84.803] (--) using VT number 4
[ 84.814] (II) Loading /usr/lib/xorg/modules/drivers/vesa_drv.so
[ 84.814] vesa: Ignoring device with a bound kernel driver
[ 84.814] (WW) Falling back to old probe method for vesa
[ 84.814] (II) Loading sub module "fbdevhw"
[ 84.814] (II) LoadModule: "fbdevhw"
[ 84.819] (II) Loading /usr/lib/xorg/modules/libfbdevhw.so
[ 84.836] (II) Module fbdevhw: vendor="X.Org Foundation"
[ 84.836] compiled for 1.11.3, module version = 0.0.2
[ 84.836] ABI class: X.Org Video Driver, version 11.0
[ 84.836] (II) Loading /usr/lib/xorg/modules/drivers/fbdev_drv.so
[ 84.836] (II) Loading /usr/lib/xorg/modules/libfbdevhw.so
[ 84.871] (EE) open /dev/fb0: No such device
[ 84.871] (WW) Falling back to old probe method for fbdev
[ 84.871] (WW) VGA arbiter: cannot open kernel arbiter, no multi-card support
[ 84.871] (II) UnloadModule: "vesa"
[ 84.871] (II) Unloading vesa
[ 84.871] (II) UnloadModule: "fbdev"
[ 84.871] (II) Unloading fbdev
[ 84.871] (II) UnloadModule: "fbdevhw"
[ 84.871] (II) Unloading fbdevhw
[ 84.871] (EE) Screen(s) found, but none have a usable configuration.
[ 84.872]
Fatal server error:
[ 84.872] no screens found
[ 84.872]
Please consult the The X.Org Foundation support
at http://wiki.x.org
for help.
[ 84.872] Please also check the log file at "/var/log/Xorg.0.log" for additional information.
[ 84.872]
[ 84.877] ddxSigGiveUp: Closing log
[ 84.877] Server terminated with error (1). Closing log file.
To get X started I have removed poulsbo modules...
# find / -name '*psb_gfx*' -o -name '*poulsbo*'
...
/lib/modules/3.2.29/kernel/drivers/staging/gma500/psb_gfx.ko
...
/lib/modules/3.2.29/kernel/drivers/gpu/stub/poulsbo.ko
...
# rm /lib/modules/3.2.29/kernel/drivers/staging/gma500/psb_gfx.ko
# rm /lib/modules/3.2.29/kernel/drivers/gpu/stub/poulsbo.ko
...and save back to USB flash drive while rebooting.
After that, Precise Puppy can run X Window System by vesa driver in this book.