Hi Nick,
First thing to check - have you ever had the -fglrx driver installed?
If so, leftover bits can sometimes cause problems like these. See
https://wiki.ubuntu.com/X/Troubleshooting/FglrxInteferesWithRadeonDriver
for directions on removing it completely.
** Changed in: xserver-xorg-video-ati (Ubuntu)
Status: Triaged => Incomplete
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[X1300] Video Corruption with ATi X1300 and open drivers
https://bugs.launchpad.net/bugs/323245
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