Seems like there is a thread going about this on the X list:
http://lists.x.org/archives/xorg-driver-ati/2010-March/014074.html

I don't know how to mark this as an upstream bug, but it seems pretty
obvious at this point it's an upstream issue.

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X does not behave properly with the -16 kernel in Lucid
https://bugs.launchpad.net/bugs/539350
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