try this PPA. it helped with my probs

deb http://ppa.launchpad.net/xorg-edgers/ppa/ubuntu karmic main

then do a dist-upgrade

notice:

install ppa-purge at first! if you can't get to X again, you might have
no internet connection (wifi) so the best would be to first dist-
upgrade, then downgrade via ppa-purge, and then dist-upgrade again, then
all packages are in /var/cache/apt/archives and can be installed with
ppa-purge without a internet connection

from their website: !!!!!!!!To revert to official packages, you can
install the        ppa-purge          package and run "sudo ppa-purge
xorg-edgers". Note that you will want to reinstall linux-libc-dev
afterwards manually if you had libdrm-dev installed on karmic and
newer!!!!!!!

website: https://launchpad.net/~xorg-edgers
https://launchpad.net/~xorg-edgers/+archive/ppa

-- 
After logging out, trying to switch user, and changing from vtty back to X 
system completely hangs with a black screen with ATI Mobility Radeon non-free 
Drivers
https://bugs.launchpad.net/bugs/500056
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