Here's what was reported upstream:

Looks to me that the BIOS is claiming that it's a 1024x768 LVDS panel..  (that
is, it explicit gives that resolution, not the lack of a resolution). So first,
blame your laptop vendors for f*king up the BIOS infos (it probably comes with
a hacked windows driver to work around the problem), then, do we still have the
panel size overrides in xorg.conf ?

Try enabling the PanelSize option, e.g.,

Option "PanelSize" "1400x1050"

-- 
Cannot setup resolution higher than 1024x768 on laptop with ATI Mobility Radeon 
card
https://bugs.launchpad.net/bugs/115968
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