There are a number of similar issues reported against this driver -

For some models, it is reported that booting with radeon.new_pll=0
solves the issue

Could you please try that and report the results

Also, I have posted test kernels here:

http://people.canonical.com/~sconklin/radeon_flicker/

which contain a single candidate patch from upstream - this did NOT
fix the bug as reported on a different model of card, but testing is 
appreciated.

Steve

-- 
X does not behave properly with the -16 kernel in Lucid
https://bugs.launchpad.net/bugs/539350
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