The problem was solved for me after creating the file

/etc/modprobe.d/radeon.conf

with the content:

options radeon modeset=0

Now 2.6.31 and compiz live peacefully together. It means that the KMS
goodies do not WAI yet, right?

-- 
2.6.31 kernel breaks 3d for radeon x1600
https://bugs.launchpad.net/bugs/394263
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