The reason for the fullscreen video performance hit seems to be no XV
overlay support w/ KMS turned on. Furthermore, as of xserver-xorg-video-
ati 6.13.0-1ubuntu2, XV has been explicitly and completely disabled on
my machine (which I believe to be a mistake, bug #562537).

Temporary workaround (for me) so as to have desktop effects and accelerated 
fullscreen video:
Install the jaunty version of libgl1-mesa-dri and libgl1-mesa-glx 
(7.4-0ubuntu3.2).
Install xserver-xorg-video-ati and xserver-xorg-video-radeon version 
6.13.0-1ubuntu1 (available via launchpad at 
https://launchpad.net/ubuntu/lucid/i386/xserver-xorg-video-radeon/1:6.13.0-1ubuntu1
 and 
https://launchpad.net/ubuntu/lucid/i386/xserver-xorg-video-ati/1:6.13.0-1ubuntu1)

Obviously, I would prefer not to use these outdated packages, but it's
the only way I know of to avoid these regressions. Hopefully XV overlay
support will come to KMS soon.

-- 
[RV100/RV200] (Needs KMS) Background and full screen apps don't show up when 
Normal Visual Effects on
https://bugs.launchpad.net/bugs/444139
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