Kernel 2.6.21: I heard about some problems. I can't confirm these for myself.
Xorg 1.3: I know that Kano from KANOTIX has a workaround for this. If you did not mean that, it was a hidden message that 8.37 supports it. Thanks.
Most distributions who have the new Kernel also have Xorg 1.3. I am currently waiting for Sidux 2007-02 based on Debian/sid, the first preview of it comes this weekend. It has Kernel 2.6.21 and Xorg 1.3, too.