I can confirm this bug. Related forum thread:
http://ubuntuforums.org/showthread.php?t=958400
** Changed in: xserver-xorg-video-ati (Ubuntu)
Status: Incomplete => Confirmed
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ubuntu 8.10, ATI X1250, compiz off - 3D games in full screen show coloured
stripes
https://bugs.launchpad.net/bugs/292858
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