I see that other have had the same (similar) problem with KernelLiveEvent but no solution that I can find. So thats why I'm making my own post, to see if we can sort things out.
So, it seems like the graphics drivers crashes. The screen goes black just as it does when the computer turns off, then it looks like windows is trying to restore the drivers because the screen goes back on but only showing a fragment of what might be visible.
If I have music playing it will not be affected, tho I can't for example change song by pressing a key on the keyboard, no response in that way.
The screen will keep going off and on until I manually restart the computer by pressing the button.
Sometimes windows can come back without restarting, and then it says "graphics drivers have crashed and been restored"
The problem occurs randomly, I can't exactly say what triggers the system to crash, but it looks like it crashes the most when a lot of things are going on. Mostly when I open Firefox since I always have about 14- 15 tabs open. But it also crashes when I'm video/picture-editing/rendering.
I hope you can get something out of my description, I'm not blessed with the skill of writing well and oh yes, my english might be bad since I'm swedish...
I've seen at a different places that you want info from specific programs, so I'm posting some info below.
windows version: Windows 7 Service Pack 1, 6.1, build: 7601
windows dir: C:\Windows
CPU: GenuineIntel Intel® Core2 Duo CPU E4500 @ 2.20GHz Intel586, level: 6
2 logical processors, active mask: 3
RAM: 3220299776 total
VM: 2147352576, free: 1962852352
Crash dump directory: C:\Windows\Minidump
Crash dumps are enabled on your computer.
On Sun 2011-05-22 10:55:05 GMT your computer crashed
crash dump file: C:\Windows\Minidump\052211-16988-01.dmp
This was probably caused by the following module: dxgkrnl.sys (dxgkrnl+0x8D07B)
Bugcheck code: 0x116 (0xFFFFFFFF854D4008, 0xFFFFFFFF90B2ACBA, 0x0, 0x2)
file path: C:\Windows\system32\drivers\dxgkrnl.sys
product: Microsoft® Windows® Operating System
company: Microsoft Corporation
description: DirectX Graphics Kernel
Bug check description: This indicates that an attempt to reset the display driver and recover from a timeout failed.
The crash took place in a standard Microsoft module. Your system configuration may be incorrect. Possibly this problem is caused by another driver on your system which cannot be identified at this time.
From windows own probleminformation (have translated the words in swedish to english, so it might not be 100% accurate on that part):
A problem with your graphics hardware allows Windows no longer works properly.
Event Name: Live Kernel Event
OS Version: 6.1.7601.2.1.0.256.1
Locale ID: 1053
Files that help describe the problem
Additional information about the problem
OS Version: 6_1_7601
Service Pack: 1_0
Thanks in advance