To check if it was hardware related, I have just swapped out the video
card for a 5770 and have found the same issues.

The same dialog pops up when running Unity-2D and trying to set the
"Displays" app to extend the desktop across both monitors.

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https://bugs.launchpad.net/bugs/864505

Title:
  [Oneiric] Cannot setup dual monitor with AMD 5870

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