Apologies, like Cameron states this does seem to be radeon KMS related.
After switching to a VT after booting with nomodeset appended, I
realised this parameter has no effect. Booting as Cameron does, with
radeon.modeset=0 vga=771 resolves the problem.

When enabling the 2nd monitor with KMS disabled there is a dialogue
appearing titled "Monitor Resolution Settings" asking if we want to
change the virtual resolution, this does not appear when KMS is enabled.

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radeon KMS causes corrupt VGA output on X1400
https://bugs.launchpad.net/bugs/562138
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