Thanks for the extra info. What I was looking for in the 7.04 log is this:
(II) RADEON(0): [agp] Mode 0x0f000201 [AGP 0x1022/0x7006; Card 0x1002/0x5960]
which tells that AGP x1 was used. And now you need x4. This is not easy to 
understand...

About the Monitor section, well, upstream doesn't look back :) and
doesn't care too much about upgrades. That's our problem. Ideally the
Ubuntu upgrade should remove the Monitor section, but it's tricky since
some people don't like their xorg.conf to be messed with. But we should
document it better.

** Changed in: xserver-xorg-video-ati (Ubuntu)
     Assignee: Tormod Volden (tormodvolden) => (unassigned)
       Status: Incomplete => Confirmed

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Freeze with ati driver during boot on 8.04
https://bugs.launchpad.net/bugs/214105
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