Could you guys try the following (untested) patch which should summarize
what has been said here and in the upstream bug?

Brice

Index: xserver-xorg-video-ati/src/atimach64xv.c
===================================================================
--- xserver-xorg-video-ati.orig/src/atimach64xv.c	2007-07-09 11:59:37.000000000 +0200
+++ xserver-xorg-video-ati/src/atimach64xv.c	2007-07-09 12:01:45.000000000 +0200
@@ -979,6 +979,9 @@
     if (pATI->ActiveSurface)
         return Success;
 
+    if (DstH < 16)
+        return Success;
+
     if (!ATIMach64ClipVideo(pScreenInfo, pATI, ImageID,
                             SrcX, SrcY, SrcW, SrcH,
                             DstX, DstY, &DstW, &DstH,

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