Freyr, are you also seeing these lines in your Xorg.0.log?
(WW) RADEON(0): Mode 1280x1024 is out of range.
(WW) RADEON(0): Valid modes must be between 320x200-1024x768
Could one of you see if adding Option "DDCMode" "true" has any affect on this?
Also try Option "IgnoreEDID" "true".
Or also try commenting out the Load "vbe" line in the modules section.
(I doubt this will do anything, but might be worth a try).
** Changed in: xorg (Ubuntu)
Status: Confirmed => Needs Info
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Cannot setup resolution higher than 1024x768 on laptop with ATI Mobility Radeon
card
https://bugs.launchpad.net/bugs/115968
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