fglrx will no longer work for your card. You must use the open-source radeon 
driver (or use Ubuntu 12.04 if you need fglrx).
Make sure fglrx is purged: 
http://wiki.cchtml.com/index.php/Ubuntu_Precise_Installation_Guide#Removing_Catalyst.2Ffglrx
Restart the system, and if errors still occur, attach your /var/log/Xorg.0.log 
file

** Package changed: fglrx-installer (Ubuntu) => xorg (Ubuntu)

** Changed in: xorg (Ubuntu)
       Status: Confirmed => Incomplete

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https://bugs.launchpad.net/bugs/1068644

Title:
  After upgrading to 12.10, ubuntu runs in "low graphics mode"

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