I had the same problem as l0b0 when I upgraded from 8.40 driver to
8.42.3. My screen also flashes periodically.

I had the composite option disabled in my xorg.conf, so I tried enabling
it, and the box seems to have gone away. My screen still flashes,
though.

I'm running a dual screen horizontal setup on Ubuntu 7.10:

01:00.0 VGA compatible controller: ATI Technologies Inc RV516 [Radeon 
X1300/X1550 Series]
01:00.1 Display controller: ATI Technologies Inc RV516 [Radeon X1300 Pro] 
(Secondary)

** Attachment added: "xorg.conf"
   http://launchpadlibrarian.net/10303466/xorg.conf

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ATI display update causes lines to form on screen in Firefox
https://bugs.launchpad.net/bugs/150627
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