Had similar problems with the RV410 AGP card. Passing the parameter via
grub command line did not work but for me this worked:

echo "options radeon agpmode=1" >>  /etc/modprobe.d/radeon.conf
update-initramfs -u


the last one is necessary to get the option into the initramfs-image. Of cource 
you can try agpmode=1,2,3.... here as well.

-- 
[RV410] Screen gets unreadable
https://bugs.launchpad.net/bugs/559189
You received this bug notification because you are a member of Ubuntu-X,
which is the registrant for xserver-xorg-driver-ati.

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