For some reason you have KMS disabled, does grep -R modeset
/etc/modprobe.d/ return anything? If so get rid of that line. If not,
can you try booting with radeon.modeset=1 added to the kernel command
line?

** Changed in: xserver-xorg-video-ati (Ubuntu)
       Status: New => Incomplete

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https://bugs.launchpad.net/bugs/729386

Title:
  [Natty] DRI2 fails with x1200, compositing broken

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