I'm having the same problem. The 'Hardware Information' app lists my
video card as: Radeon RV100 QY [Radeon 7000/VE]

Under Feisty I was successfully using Xinerama to enable dual monitors.
Just this morning I upgraded to Gutsy, and no matter what I do I cannot
get it to work.

When I booted into Gutsy for the first time, I got the "reduced
resolution" message, and it let me configure my settings. For some
reason it had chosen the vesa driver instead of the ati, which is odd
because I had accidentally booted from the Gutsy CD a moment before and
it had correctly recognized the video card and screen resolution.

Upon first using the "reduced resolution" dialog, it didn't offer me the
possibility of using higher resolutions because it was using the vesa
driver, which I found confusing. (Although I consider myself technically
savvy, I was in Joe Sixpack mode.)

I rebooted again (without having made any changes to the display
configuration, that I'm aware of) and this time it gave me the graphical
login, albeit at 800x600. I logged in, opened up "Screens and Graphics",
chose the ati driver and clicked OK. To my surprise, it didn't offer me
any higher resolutions, so I checked that I had selected the ati driver
(I had), clicked OK twice, re-opened "Screens and Graphics" and still
did not see any higher resolutions. I hit Ctrl+Alt+Backspace to restart
X, and still had no higher resolutions at my disposal. Finally, (after
checking that the ati driver was still selected) I rebooted to a
beautiful 1280x1024 login screen. Since changing the driver obviously
requires a reboot to take effect, it would be nice if Ubuntu would tell
me that.

So now, after a little trial and error I have full resolution in effect.
However both screens show the same image, and "Screens and Graphics"
does not offer me the possibility of enabling dual monitors. Only one
screen is listed, and the radio buttons are greyed out.

As Timo noted above, I no longer have the option of using Xinerama
(unless I downgrade to Feisty's version of X, according to the Ubuntu
Wiki). Additionally, I have been unable to find any information
describing how to manually enable dual monitor support using xrandr,
which I would be happy to do.

Clearly this is a bug, which is why I'm posting this here instead of the
Wiki. However, after scouring the Web for a solution I find information
lacking. If any of the developers or more knowledgable individuals know
how to manually set up dual monitors using xrandr, an informative post
would make many people happy.

-- 
Dual Monitor Problems
https://bugs.launchpad.net/bugs/44708
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