Can you please try with
Option "DRI" "off"
in the Device section of your /etc/X11/xorg.conf?
** Changed in: xserver-xorg-video-ati (Ubuntu)
Assignee: (unassigned) => Tormod Volden (tormodvolden)
Status: New => Incomplete
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Chess-board like garbage and keyboard lockup on X1650
https://bugs.launchpad.net/bugs/338927
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