I installed 2.6.29 kernel per bug 355155. It looks like it is much better now. 
So for all my 3-D apps are 
working fine
 
 http://kernel.ubuntu.com/~kernel-ppa/mainline/v2.6.29.4/

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ATI: open-source driver could hang in some 3D applications.
https://bugs.launchpad.net/bugs/377605
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