You may or may not have the latest driver installed. If the card you are using came with your machine (from Apple) and you are using the driver provided by the latest system update, 10.2.6 (haven't installed a different driver), then you should be fine (as in, you have the latest driver available and recommended for your system, not that such a driver is guaranteed to be bug-free). The reason I brought this up was we just had a report of a problem (performance, not kernel panics) from a user with an ATI card who had updated his drivers using something released by ATI. When he went back and re-installed 10.2.6, the performance problem went away.
Apple has an article in their AppleCare Knowledge Base about NVidia GeForce 4 (MX or Ti) cards attached to an LCD display and problems when waking the computer from sleep (<
http://docs.info.apple.com/article.html?artnum=25434>). Doesn't mention kernel panics, but it's worth checking out.
One other general troubleshooting tip: try disconnecting all unneeded external devices (e.g., USB hub, external hard drive, Firewire devices, etc) and see if the problem still occurs.