Had this problem on a nw8440 and 2.6.32-21-generic. As Wayne Stark
wrote on 2010-04-13, disabling KMS solved this for me.

echo options radeon modeset=0 > /etc/modprobe.d/radeon-kms.conf
 
I don't use an external display but at least this solved the issue on the 
laptop display.

-- 
[RV530] video problem flicker unreadable ati radeon [Needs pll quirk]
https://bugs.launchpad.net/bugs/537640
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