Looks like an issue with the kernel drm code.  Bumping over to kernel
team.

Meanwhile, you could try either booting with KMS off or try installing
the mainline kernel build which has newer drm.

** Package changed: xserver-xorg-video-ati (Ubuntu) => linux (Ubuntu)

** Tags added: xorg-needs-kernel-fix

-- 
ATI display drivers (both free and fglrx) doesn't work under Karmic/Lucid for 
HD 4330
https://bugs.launchpad.net/bugs/518802
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