Apologies to Andy for not seeing his request on 12 April. I haven't had 
notification and I've moved on since then.
Currently running 11.04 (Unity desktop) on iMac i3 (21.5"). An update to fglrx 
and amdcc seemed to fix the display port problem. All runs well on main screen, 
full resolution. Cannot set up dual monitor with extended desktop though.
I triple boot my system and I can get Archlinux, with recent (11.3) catalyst 
drivers, to drive both screens as extended desktop.
11.3 was the first driver to recognise the two monitors correctly.
I think ubuntu video is a bit more choppy than Arch. Most ubuntu videos have 
flashing block artefacts. Also kde is a bit smoother than gnome desktop.

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https://bugs.launchpad.net/bugs/597070

Title:
  Imac Radeon HD 4850 switch "Mini Display Port" output during install
  resulting black screen

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