I'm confirming this bug in Kubuntu 8.10 Alpha 5 Live CD.
I'll see the exact same behaviour and I too got an ATI HD3870.

For your information I have also seen the same on Kubuntu 8.04 when trying the 
latest xserver-xorg-video-ati from https://launchpad.net/~tormodvolden/+archive 
(xserver-xorg-video-ati - 1:6.9.0+git20080820.1cf7a549-0ubuntu0tormod~hardy)
The latest RadeonHD-driver (xserver-xorg-video-radeonhd - 
1.2.1+git20080816.76272c54-0ubuntu0tormod~hardy) from the same place works 
though.

-- 
Radeon Driver fails to load on 2 Sep daily
https://bugs.launchpad.net/bugs/264462
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