Also, I noticed this in the log:

(II) RADEON(0): XAA Render acceleration unsupported on Radeon 9500/9700 and 
newer. Please use EXA instead.
(II) RADEON(0): Render acceleration disabled
(II) RADEON(0): num quad-pipes is 1
(II) RADEON(0): Using XFree86 Acceleration Architecture (XAA)

Does turning on EXA in xorg.conf make the issue go away?  If so, perhaps
this is a dupe of #267612

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Xv displays flickering pixel garbage (intrepid)
https://bugs.launchpad.net/bugs/267297
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