I don't have any problem with dpms! Using a geforce2 mx, the latest nvidia drivers and running xfree 4.02.
What does "xset q" tell you?
especially these lines:
prefer blanking: yes allow exposures: yes
timeout: 420 cycle: 600
I found out that kde likes to set the screen saver timeout to 0 (zero), which disables dpms for me (and which is the same as setting "xset s 0").
If I want to have dpms working under kde, I have to
a) enable dpms in the control centre of kde
b) launch "xset s 420" (or something like that) via the .xinitrc
A "zero" value (see above) disables dpms, which means that when entering the dpms state the screen starts flashing and flashing in a very distorted way.
Maybe you could check this?