aticonfig seems to be unable to use 'empty' xorg.conf
as a workaround, I've managed to re-fill xorg.conf with proriate data using 
commang:

Xorg -configure

This command brought me an "xorg.conf.new" file in the current directory. I've 
copied it over /etc/X11/xorg.conf (back up previous version!).
After that, 'sudo aticonfig --initial' worked just fine

-- 
aticonfig refuses to start on Hardy
https://bugs.launchpad.net/bugs/179508
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