I am having a similar issue with my ATI x1600. When I enable Normal or
Extra Desktop Effects, I get a blank white screen however I can tell
that X is still interactive since when I mouse over say a window edge it
can grab and manipulate a window even tho I can't see it.

I added :

Section "Module"
 Load "glx"
EndSection
Section "Extensions"
 Option "Composite" "1"
EndSection

to xorg.conf and restarted, however this did not fix it. If there is any
further information I can provide please let me know.

-- 
Ubuntu 8.04 alpha 4 - restricted driver (ATI) causes low graphics mode and 
touchpad double click error
https://bugs.launchpad.net/bugs/192702
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