Had a closer look at your Xorg.log:

[    25.862] (II) LoadModule: "r128"
[    25.863] (WW) Warning, couldn't open module r128
[    25.863] (II) UnloadModule: "r128"
[    25.863] (II) Unloading r128
[    25.896] (EE) Failed to load module "r128" (module does not exist, 0)
[    25.896] (II) LoadModule: "modesetting"

xorg tries to load the appropriate driver for your ATI Rage, wich is
"r128". Since this driver is not found, it uses the generic
"modesetting" driver, which in turn resorts to a 15bpp framebuffer.

Just found out that the needed xserver-xorg-video-r128 package is no
longer installed by default in Yakkety. Maybe this is also the case in
Xenial. So the easy solution for you would be to "sudo apt-get install
xserver-xorg-video-r128" and reboot. Maybe you get an accelerated 24bpp
desktop again without needing a supplementary xorg.conf!

>Since the dev had gotten back to me to post the screen shot, and then,
>nothing posted/commented back about it, I've come to the conclusion that it
>is just the image file itself that is a low spec/low res image. Other
>backgrounds, like the "cosmos" one that changes images, some of them are
>perfect, and others have this low resolution issue.

Nope it is the other way round. The background image is 24bpp but the
display driver has to show it on an 15/16bpp screen - it needs to reduce
the colours somehow which makes the image appear blotchy. Icons don't
have that many gradients which leaves them looking crisp on 15/16bpp.

-- 
You received this bug notification because you are a member of Ubuntu
Touch seeded packages, which is subscribed to xorg in Ubuntu.
https://bugs.launchpad.net/bugs/1541082

Title:
  [PowerMac3,1] Blotchy GUI graphics for images

Status in xorg package in Ubuntu:
  New

Bug description:
  The background image and other image files are blotchy.

  ---
  ApportVersion: 2.20.1-0ubuntu2.1
  Architecture: powerpc
  BootLog:
   fsck from util-linux 2.27.1
   /dev/sda13: clean, 182266/1458176 files, 1099215/5826607 blocks
  CompizPlugins: No value set for 
`/apps/compiz-1/general/screen0/options/active_plugins'
  CompositorRunning: None
  DistUpgraded: Fresh install
  DistroCodename: xenial
  DistroRelease: Ubuntu 16.04
  DistroVariant: ubuntu
  DpkgLog:

  ExtraDebuggingInterest: Yes, if not too technical
  GraphicsCard: Advanced Micro Devices, Inc. [AMD/ATI] Rage 128 PRO AGP 4x TMDS 
[1002:5046] (prog-if 00 [VGA controller])
  InstallationDate: Installed on 2016-01-31 (154 days ago)
  InstallationMedia: Ubuntu-MATE 16.04 LTS "Xenial Xerus" - Alpha powerpc 
(20160123)
  Lsusb:
   Bus 002 Device 004: ID 047d:1029 Kensington Mouse*in*a*Box Optical Elite
   Bus 002 Device 003: ID 05ac:0220 Apple, Inc. Aluminum Keyboard (ANSI)
   Bus 002 Device 002: ID 05ac:1006 Apple, Inc. Hub in Aluminum Keyboard
   Bus 002 Device 001: ID 1d6b:0001 Linux Foundation 1.1 root hub
   Bus 001 Device 001: ID 1d6b:0001 Linux Foundation 1.1 root hub
  Package: xorg 1:7.7+13ubuntu3
  PackageArchitecture: powerpc
  ProcEnviron:
   LANGUAGE=en_US
   TERM=xterm
   PATH=(custom, no user)
   LANG=en_US.UTF-8
   SHELL=/bin/bash
  ProcKernelCmdLine: root=UUID=4eb514e5-48d7-4e99-a402-5294c80e78cc ro quiet 
splash
  ProcVersionSignature: Ubuntu 4.4.0-24.43-powerpc-smp 4.4.10
  Renderer: Software
  Tags:  xenial ubuntu
  Uname: Linux 4.4.0-24-powerpc-smp ppc
  UpgradeStatus: No upgrade log present (probably fresh install)
  UserGroups:

  _MarkForUpload: True
  version.compiz: compiz 1:0.9.12.2+16.04.20160526-0ubuntu1
  version.libdrm2: libdrm2 2.4.67-1ubuntu0.16.04.1
  version.libgl1-mesa-dri: libgl1-mesa-dri 11.2.0-1ubuntu2
  version.libgl1-mesa-dri-experimental: libgl1-mesa-dri-experimental N/A
  version.libgl1-mesa-glx: libgl1-mesa-glx 11.2.0-1ubuntu2
  version.xserver-xorg-core: xserver-xorg-core 2:1.18.3-1ubuntu2.2
  version.xserver-xorg-input-evdev: xserver-xorg-input-evdev 1:2.10.1-1ubuntu2
  version.xserver-xorg-video-ati: xserver-xorg-video-ati 1:7.7.0-1
  version.xserver-xorg-video-intel: xserver-xorg-video-intel N/A
  version.xserver-xorg-video-nouveau: xserver-xorg-video-nouveau 
1:1.0.12-1build2

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