BTW, I just finished testing the following scenarios, just to rule out a 
kernel-related issue:
-Xserver: 1.18
-xserver-xorg-video-ati: 7.7

On kernels:
-3.13.0-95
-3.16.0-77
-3.19.0-68
-4.2.0-42
-4.4.0-36

Video lags on all kernels.

When using:
-Xserver: 1.16
-xserver-xorg-video-ati: 7.5

on the above kernels, video and GUI respond smoothly.

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https://bugs.launchpad.net/bugs/1610591

Title:
  Video acceleration regression for Radeon Xpress 200M (r300) in xorg-
  lts-xenial & xorg-lts-wily

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