I have a similar issue.

I installed Natty a couple of days ago. When Unity came up, it was
sluggish and many apps crashed. I switched to "classic with no effects",
and continued setting up stuff. Later I realised that hardware
acceleration was not working. I fixed it (don't remember how), and the
problems became worse.

Since my idea for this machine is to use it as a media center, I
installed many of this apps, and thought that there were buggy, as I
could only see blank screens.

Later I realised that not even glxgears works. If I disable KMS, or set
LIBGL_ALWAYS_SOFTWARE=1, they work, but so slow that the apps are
unusable.

I have already tried installing the propietary drivers, which tell me
that my card is unsupported. I installed the X edgers drivers, with no
improvement. Tried different xorg.conf tweaks that I found on the 'net,
no dice.

As most of these media apps for some reason require 3d accel (stupid
shiny effects), I need to make this work.

$ lspci |grep VGA
01:05.0 VGA compatible controller: ATI Technologies Inc RS690M [Radeon X1200 
Series]

$ glxinfo |grep render
direct rendering: Yes
OpenGL renderer string: Gallium 0.4 on ATI RS690
    GL_NV_blend_square, GL_NV_conditional_render, GL_NV_light_max_exponent,

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https://bugs.launchpad.net/bugs/755791

Title:
  [RS690M] No 3d acceleration in Radeon X1200 with new Gallium r300 / 3d
  drivers in 11.04 Beta 2

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