Don't run away just yet - you are close.
Once we get Ubuntu running, if you still want Xubuntu, you can always install it manually by running
and switching to it at your next login session by specifying xubuntu at the gdm login screen, usually at the lower left. I don't know why Xubuntu isn't providing a specific Hardy iso, and hope that they aren't going to stop updates for it - this is the kind of stuff xubuntu is made for.
sudo apt-get install xubuntu-desktop
Tip: You may not even need/want a full Xubuntu - from Ubuntu, you could just install the main component, XFCE4, and switch to that at the next login....
Here's a good link on where to download the PPC images:
Back to the main problem though. It appears you might have to manually edit your /etc/X11/xorg.conf file to accomodate the pismo. I'd have to look back in the archive PPC threads - I'm sure I've seen a few.
That fact that you are seeing dmesg lines scrolling by when you do video=ofonly is a good sign, but it appears that once it reaches the gui desktop, X is misconfigured. When the screen goes black, can you get to a virtual terminal via CTRL-ALT-F1 ?
As a diagnostic, you could try installing the older Feisty 7.04 and see how that goes, especially when it comes to the /etc/X11/xorg configuration.