I have the same problem on my iBook, radeon 9550. My kernel is 
2.6.15-26-powerpc - I'm new to ubuntu and haven't tried other kernels before so 
I don't know if it was supposed to work, but in other distro (gentoo) it worked 
perfectly with just vanilla kernel and xorg...
my dmesg:

[   85.949668] [drm] Initialized drm 1.0.1 20051102
[   85.995517] [drm] Initialized radeon 1.24.0 20060225 on minor 0
[   87.118258] agpgart: Putting AGP V2 device at 0000:00:0b.0 into 4x mode
[   87.118272] agpgart: Putting AGP V2 device at 0000:00:10.0 into 4x mode
[   87.198209] [drm:radeon_do_init_cp] *ERROR* Cannot initialise DRM on this 
card
[   87.198218] This card requires a new X.org DDX

-- 
[regression] 2.6.15-22-powerpc -> 2.6.15-23-powerpc: direct rendering gone 
missing with 
https://launchpad.net/bugs/46578

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