This was a problem caused by linux 2.6.31-1 which had KMS enabled by
default for radeon. It's fixed in linux 2.6.31-2

(EE) RADEON(0): [dri] RADEONDRIGetVersion failed because of a version mismatch.
[dri] radeon.o kernel module version is 2.0.0 but version 1.17.0 or newer is 
needed.
[dri] Disabling DRI.


** Changed in: mesa (Ubuntu)
       Status: Incomplete => Fix Released

-- 
Slow perfomance with Mesa 7.5-rc4 on Karmic
https://bugs.launchpad.net/bugs/395655
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which is subscribed to mesa in ubuntu.

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