Got my desktop working again, here's what did it for me:

- Fresh Kubuntu Alternate x64 CD install.
- Boot to recovery console and do the following:
>apt-get update
>apt-get upgrade
>apt-get install fglrx
>aticonfig --initial
>reboot

So just installing updated fglrx module and using aticonfig to create
the intial configuration worked. Does this mean the problem is just in
the 'radeon' module then?

-- 
[lucid] ATI hd5xxx cards wrongly doing kms?
https://bugs.launchpad.net/bugs/560306
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