You need to force 24bit depth. Update to the latest packages, then run
'dpkg-reconfigure xserver-xorg', and then after restarting X enable the
restricted driver.
** Changed in: linux-restricted-modules-2.6.24 (Ubuntu)
Sourcepackagename: xorg => linux-restricted-modules-2.6.24
Status: New => Fix Released
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ati radeon x 1650
https://bugs.launchpad.net/bugs/197981
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