It still shows that in my lspci as well, but that doesn't affect anything.
It should still work; it does on my machine. The dmesg output is the part that 
matters.
Note that I also had to install the latest xorg ati driver (6.8.0) in order to 
get 3D working.
But this patch certainly fixes the AGP issue.

-- 
ati-agp fails to load Radeon 9000 IGP (device id: 7831)
https://bugs.launchpad.net/bugs/178634
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