(Please also update to the newest PPA packages of -ati/-radeon)
Can you please try to add
Option "AccelMethod" "XAA"
to the Device section of your xorg.conf? I am not sure these cards should use
EXA if DRI is not enabled.
** Changed in: xserver-xorg-video-ati (Ubuntu)
Status: Confirmed => Incomplete
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[HD 3650] Startup failure "Idle timed out, resetting engine..."
https://bugs.launchpad.net/bugs/341681
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