This is practically fixed in Hardy. The ati-driver supports your card,
and you do not need to manually set up anything in order to use fglrx..
just let the driver manager to load fglrx.

** Changed in: xserver-xorg-driver-vesa
       Status: New => Invalid

** Changed in: xorg (Ubuntu)
       Status: New => Fix Released

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Ubuntu 7.10 - fglrx driver - ATI Technologies Inc Radeon X1200 Series does not 
work out of the box
https://bugs.launchpad.net/bugs/202264
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