I also confirm that disabling KMS solves this problem.
Tested on Ubuntu 10.04 with kernel 2.6.32-21 on IBM/Lenovo T60 with Mobility 
Radeon X1300.
Login screen is not with the right resolution, but who care if external monitor 
is working again :-)

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[RV530] video problem flicker unreadable ati radeon [Needs pll quirk]
https://bugs.launchpad.net/bugs/537640
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