Success!
Got the AVlinux 4.0 working on the (...bit hard to find the word...) GeForce7050PV integrated.
For anybody who might find it useful, here's my howto:
1. AVlinux live DVD boot led to the VIDEO MODE NOT SUPPORTED msg, i.e. nowhere, I couldn't even get to a legible console.
2. The 'xforcevesa' option led to jubled yellowish mess, after hitting Ctrl+Alst+F2 it provided a console.
Maybe I got to the console from the text-only boot option, actually, but the important thing is that is was somehow possible3.
cd /
locate remastersys-installer
found me the installer in
/usr/bin
directory
4. Running the Installer was a pleasure

/usr/bin/remastersys-installer
5. Then I got the system which I could not see, but booting as single user (catching Grub options on booting with any key after the BIOS splash) made it possible to rewrite the
/usr/share/xresprobe/xorg.conf
file according to the xorg.conf file which worked for me in the Debian 5 lenny
I used
nano /usr/share/xresprobe/xorg.conf
and then I copied the file to the /etc/X11/ directory
cd /usr/share/xresprobe
cp xorg.conf /etc/X11/
then I rebooted
init 6
closed my eyes or made my 1574th coffee
and voila there it was

I AM SURE that the procedure was probably unreasonably clumsy, but I am there and straight after next payday I'm on PayPal with my contribution!
As I said I absolutely love the distro (been on planetccrma so far and trying out UbuntuStudio for my students)
If anybody could use more details, post a message pls.
thanks to GMaq for great encouragement and all the work