That's because compiz needs 3D support which your card lacks, and since
it's using vesa that's not going to happen. In hardy you can use the
proprietary fglrx which should work with compiz.

** Changed in: xserver-xorg-video-vesa (Ubuntu)
Sourcepackagename: xserver-xorg-video-ati => xserver-xorg-video-vesa
       Status: Incomplete => Fix Released

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ATI Mobility Radeon X1400 is not supported
https://bugs.launchpad.net/bugs/148505
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