I have just re-installed using ATI Proprietary driver and it actually
seems to be working now. Perhaps it was an issue with AMD's driver.

I am now using:

Catalyst: 11.9
Driver packaging version: 8.892-110914m-125703C-ATI
2D Driver version: 8.89.4
Catalyst Control Center Version: 2.13
RandR version: 1.3

I will confirm tomorrow with the same test I did initially so I can
check the same setup but with updated drivers.

** Attachment added: "scaling-with-amd-prop.png"
   
https://bugs.launchpad.net/ubuntu/+source/vinagre/+bug/773437/+attachment/2541202/+files/scaling-with-amd-prop.png

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https://bugs.launchpad.net/bugs/773437

Title:
  Scaling display goes bright/white

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