Everything is working fine for me now. No more scrambled screen. (this bug) No 
more multiple loading bars and unaccessible virtual terminals. (bug #245849 & 
bug #253243).
And direct rendering is still there.

I haven't tried out different AGP settings yet. AGP mode 4 works well for me.
Here's my system info:

* ubu #133192
  AGPMode needed: 4
  Model:          Compaq Presario 2500
  Host Bridge:    [0600]: ATI Technologies Inc RS200/RS200M AGP Bridge [IGP 
340M] [1002:cbb2] (rev 02)
  Graphics Card:  [0300]: ATI Technologies Inc Radeon IGP 330M/340M/350M 
[1002:4337]
  HW changes:     None (except some added RAM)
  BIOS:           (Unknown)


** Attachment added: "lspci-vvnn.log"
   http://launchpadlibrarian.net/17312356/lspci-vvnn.log

-- 
Blank screen or distorted image because of wrong default AGPMode value
https://bugs.launchpad.net/bugs/133192
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