FIXED!

So I now have the final 8.04 running on my system. This fix should also
work for the beta versions and maybe the alphas.

To get it working I simply installed :

linux-restricted-modules 2.6.24.16.18

which is not installed by default. you have to make sure you have the
third party software repos enabled in your repository list for it to
show up.

Then simply open "Hardware Drivers" Under System -> Administration

Enable the ATI driver, restart and you should be good to go!

I'm kicking myself how easy this was.

-- 
[fglrx] Ati x1600Pro White screen on activating compiz
https://bugs.launchpad.net/bugs/196900
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