With the Linux 3.2 kernel, which will be at the heart of Ubuntu 12.04 "Precise Pangolin", there is the improved open-source Poulsbo driver for GMA500/GMA600 series graphics. Poulsbo is the notorious graphics engine found on some low-power Intel systems that's not an in-house Intel design but rather was sourced from Imagination Technologies and their SGX540 design. This has caused a bloody mess now for years.
This open-source Poulsbo driver isn't a full KMS/DDX/Mesa/Gallium3D stack but rather just a DRM/KMS driver that doesn't have the bits to support 3D acceleration. Alan Cox, the author of this driver that's been written out of the various other Poulsbo Linux drivers and bits of public documentation, also says that video acceleration in theory is possible. However, no one has worked on the open-source Poulsbo video code. There's still a long TODO list for this driver.
This driver has been a work-in-progress for a while and with the 3.2 kernel it's received the latest batch of improvements that make it good enough to move out of staging and into the mainline DRM area.
In recently testing the CompuLab Fit-PC2 again for the ARM Cortex-A9 benchmarking from the PandaBoard ES, this system with an Intel Atom Z530 and Poulsbo graphics was still very sluggish for 2D on Ubuntu 11.10. Therefore, I decided to see where things are at in Precise using the latest Ubuntu 12.04 LTS daily media.
The 2D performance when switching to the new open-source Poulsbo graphics driver is better than the stock experience on earlier Ubuntu releases, but it's still not perfect. At times the performance was sluggish, when calling upon xrandr there would be screen flashes, and there were some other minor problems. Again, there's also no hardware-accelerated 3D or video support at this time, but at least it's open-source and in the mainline kernel. (Soon though you can at least have the GNOME Shell.)
This Intel Poulsbo driver is moving along under Linux, but there's still a lot left to be desired and you're limited to using the Poulsbo binary blobs if you actually want a useful Linux system and are stuck with this hardware.
For those wanting to explore more about the various Poulsbo (GMA500) options or needing a step-by-step guide, consult the Ubuntu Wiki.