Thank you. 
Did dpkg-reconfigure to effect above changes and it now works like a charm.
I did not upgrade from Edgy. This was a clean Herd 3 install with regular 
updates. 
I don't know exactly what happened, but this ticket can probably be closed out.

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xserver-xorg-video-ati broken in Feisty
https://launchpad.net/bugs/98800

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