I've just upgraded the kernel to 4.4.0-34-lowlatency by installing the 
linux-image-lowlatency-lts-xenial package.
Video acceleration works just fine combined with the 
xserver-xorg-video-radeon-lts-vivid (DRI2).

Problems begin when using xserver-xorg-video-radeon-lts-wily or xserver-
xorg-video-radeon-lts-xenial.

Tearing ensues, regardless of the presence of a xorg.conf config file to
enable/disable options to improve framerate. Enabling DRI3 only worsens
the performance regression, and accentuates tearing.

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https://bugs.launchpad.net/bugs/1610591

Title:
  Video acceleration regression for Radeon Xpress 200M (r300) in xorg-
  lts-xenial & xorg-lts-wily

Status in xorg-lts-transitional package in Ubuntu:
  New

Bug description:
  After updating the Ubuntu HWE stack in 14.04 to Xenial (kernel 4.4 and
  xserver-xorg-video-radeon-lts-xenial), system boots up fine and
  responsively, but screen is laggy; there is a tremendous performance
  regression in comparison to xorg-lts-vivid. Lots of video tearing that
  did not occur when using xserver-xorg-video-radeon-lts-vivid.

  System is an older Pentium laptop (Packard Bell EasyNote) with a Radeon 
Xpress 200M chip (r300 driver). Video acceleration was working with DRI2 under 
the Vivid stack (kernel 3.19-64-lowlatency + 
xserver-xorg-video-radeon-lts-vivid).
  I also tried upgrading to the Wily kernel (4.2.0-lowlatency), and video 
acceleration works fine with the Vivid xorg.

  I reported this in launchpad previously, and it was dismissed as "invalid" 
since Wily is EOL.
  The problem, however, persists in the Xenial stack, so I'm reporting it here.

  Attached are the respective Xorg.0 logs.

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