Yes, the new version of the driver was put in just _after_ herd 2. Try
eg. newest daily like http://cdimage.ubuntu.com/daily-live/20070114
/feisty-desktop-i386.iso

-- 
X fails to start in dapper, edgy with ati X600/X700/X800 (control not delegated 
to "radeon" driver, "ati" complains about Mach64).
https://launchpad.net/bugs/28925

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