This may be old hat to some of you, but it was a near-revelation to me (and tough to find through Googling) so I thought I'd share it and potentially save others some hair pulling.
If your Drupal 5 site goes crazy when you turn on CSS aggregation, try examining your stylesheet(s) for absolutely-addressed url()s. There was (and is) a bug in Drupal 5's CSS aggregator code — since aggregated CSS has to live in a different directory from the original stylesheets, all those URLs have to be rewritten. The function that rewrites them expects them all to be relative, though. So:
gets turned into:
That's obviously no good. Instead, simply make sure that your URLs are all relatively-addressed:
That should be rewritten properly by the aggregator.
The more complete solution, of course, is to fix drupal_build_css_cache(). There is a patch available, but since the issue has been more thoroughly addressed in Drupal 6 and 7, not much attention is being paid to fixing it in 5. And that's probably okay: in most cases it's going to be quicker and easier to simply edit your stylesheet to use relative paths. It's best to avoid patching core when possible, and this is no exception.