This seems to have been fixed with last updates.
Hardy Alpha 6 live cd works fine. (Alpha 5 had this problem)
So I put it fixed.
** Changed in: xserver-xorg-video-ati (Ubuntu)
Status: New => Fix Released
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Radeon xserver shows corrupt display on X startup (IGP330/340/350 chipset)
https://bugs.launchpad.net/bugs/188249
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