Update: new xorg-ati drivers in edgers ppa. Problem solved (I can log in
with mode setting enabled), video output and openGL apps work as they
should. Check if the update is good for you all as well.

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X fails to start up after mesa+git update - gdm loops after logging in
https://bugs.launchpad.net/bugs/419126
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which is subscribed to xserver-xorg-video-ati in ubuntu.

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