I believe JaXXoN has done a great job of summarizing the situation. Here's a link to a summary of Fedora 7's fast user switching feature:
I too was having difficulties with fast user switching in Fedora 7. Instead of lock-ups or instability, though, the problem I had was that the second user to log-in was stuck with a resolution of 640 x 480. Closure inspection of the logs revealed that the second X session was unable to run autodetection of the display. Manually setting the monitor in System -> Administration -> Display fixed this.
It might be worth setting your display manually, on the off chance that autodetection is the cause of the instability.