Ok, Ubuntu's displayconfig is "sort of" broken. Wanting to put an external Philips monitor I had lying around for good use, I set out to configure my HP laptop, which has an i810 card, for extended display.

First things first, you'll need to do some changes to the Xorg configuration file:

sudo vi /etc/X11/xorg.conf

And add/change:

Section "Device"
    Identifier  "Intel Corporation 82852/855GM Integrated Graphics Device"
    Driver      "intel"
    BusID       "PCI:0:2:0"
    Option      "monitor-LVDS" "Generic Monitor"
    Option      "monitor-VGA"   "VGA1"
EndSection

Section "Monitor"
    Identifier  "VGA1"
    Option  "RightOf" "Generic Monitor"
    Option  "Position"  "1280 0"
EndSection

Section "Screen"
    Identifier  "Default Screen"
    Device      "Intel Corporation 82852/855GM Integrated Graphics Device"
    Monitor     "Generic Monitor"
    DefaultDepth    24
    SubSection "Display"
        Depth       15
        Modes       "1280x768"
    EndSubSection
    SubSection "Display"
        Depth       16
        Modes       "1280x768"
    EndSubSection
    SubSection "Display"
        Depth       24
        Modes       "1280x768"
        Virtual     2560 1280
    EndSubSection
EndSection

Here's the deal, I'm trusting you to know your stuff and be able to pickup what needs to be added or changed. Put this script on your ~/bin directory (which probably is or should be on the $PATH):

#!/bin/bash

switch_on() {
    EXTERNAL="`xrandr -q | grep '[^LVDS] connected' | cut -f 1 -d ' '`"
    if [ -z $EXTERNAL ]; then
        echo "No external monitors connected"
        exit 1
    fi

    if [ -z $2 ]; then
        MODE="--auto"
    else
        MODE="--mode $2"
    fi
    xrandr --output ${EXTERNAL[0]} --${1}-of LVDS $MODE
    gconftool --type int --set /apps/panel/toplevels/top_panel_screen0/monitor 1
}

switch_off() {
    EXTERNAL="`xrandr -q | grep -E '[^LVDS] (dis)?connected' | cut -f 1 -d ' '`"
    for mon in $EXTERNAL; do
        echo "Disconnecting: $EXTERNAL"
        xrandr --output $mon --off
    done
    gconftool --type int --set /apps/panel/toplevels/top_panel_screen0/monitor 0
}

help() {
    echo "`basename $0` on|off [left|right|up|down] [resolution]"
    echo "Usage: on|off turns the external displays on or off, left|right|up|down control the position of the external monitor. Resolution is optional or must be something like WxH, e.g. 1280x768"
    exit 1
}

case "$1" in
    on)
        case "$2" in
            up|down|left|right)
                switch_on $2 $3
                ;;
            *)
                help
                ;;
        esac
        ;;
    off)
        switch_off
        ;;
    *)
        help
        ;;
esac

exit 0

When you plug your external monitor to your laptop, invoke the command: external-monitor on right and you should have an extended desktop. Invoke external-monitor off and it'll be turned off. I snooped on DBUS to check if HAL emitted some kind of signal to make all this automatic, but it doesn't so you'll have to run things yourself. Other stuff I'm assuming: your external monitor has a maximum resolution of 1280x1024 and your laptop screen has a resolution of 1280x768. If any of them are able to handle higher resolutions, you'll need to change the Virtual values.