thanks Michael. I have un-installed driver using envyng -t and then
reinstall the default ATI driver from the Gnome UI. It is now working...
(don't ask me why).However the system is sometimes freezing out of the
blue... I will keep monitoring it and may report another bug when I
gather more information.

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X freeze when playing video with ATI HD 2600 graphic card - ubuntu 8.04
https://bugs.launchpad.net/bugs/298310
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