I subsequently attempted to downgrade the xserver to gusty from the disc
however this caused a number of issues dependencies and such. It is not
an easy task by any means.

I had to reload 7.10 fresh for work reasons. I will try again in the
near future.

In the mean time I was reminded of an old 7.10 fix, has anyone with this
problem tried installing :

xserver-xgl

if memory serves me, it is not installed by default on Hardy 8.04. Under
7.10, installing 'xserver-xgl' was the way to fix a composite issue with
Compiz for ATI Radeon cards.

Before installing xserver-xgl however I would make sure that you have
the following at the end of your /etc/X11/xorg.conf (though don't hold
me to it) :

Section "Extensions"
Option          "Composite"     "1"
EndSection

-- 
[fglrx] Ati x1600Pro White screen on active desktop fx
https://bugs.launchpad.net/bugs/196900
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