ATI officially dropped support for a whole boatload of chipsets with the
latest release.  You are probably no longer using the proprietary driver
because your card is not supported.  The problem is, the latest X.org is
not supportd by the old driver.

Try:

glxinfo |grep 'direct rendering'

Yes=Good
No=Bad

Your 3D will not be good enough for games without direct rendering.

-- 
Some games using 3D-acceleration don't work on Jaunty with ATI chipsets
https://bugs.launchpad.net/bugs/374590
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