Installing the ATI driver (from their site) fixes the Xorg memory leak.
Not entirely though, Xorg will still leak over time, just not as severe.
When upgrading, make sure you remove the previous version completely and
all configuration files in /etc/ati from the previous version or the
memory leaks will be extremely severe.

The lag fix (PPA) can be found at the link below, this will replace Xorg.

restricted drivers (ATI) causes Xorg memory leakage
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