There is a 6.8.0 version of the -ati driver available now in Intrepid.
Could you please test against Intrepid when you get a chance?
** Changed in: xserver-xorg-video-ati (Ubuntu Intrepid)
Status: Triaged => Incomplete
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Live-CD (7.10, 8.04) fails to start X server (ATI Xpress 1250)
https://bugs.launchpad.net/bugs/211759
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