I can confirm this is present for me:
Dell Dimension 5150 with ATI Radeon X600 256MB (of which 128MB is system RAM)
Ubuntu 12.10 Quantal
It worked fine in 10.04 at 1280x1024 on both monitors, and works fine on 
Windows 8 at the same resolution. Monitors are a Dell E196FP (connected via 
VGA) and Liyama ProLite E4315 (ancient but works fine, connected via DVI). I 
have used Precise, but only with mirroring so I can't say about that.

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https://bugs.launchpad.net/bugs/983269

Title:
  Screen Resolution exceeds 3D hardware limit

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