I can confirm a similar issue on a fresh installation of Gutsy. I have
the ATI card FireGL V7200 and dual monitors. I cannot set a higher
resolution than 800x600 on these screens without using the proprietary
ATI drivers. Even the drivers in the Restricted Manager or in Synaptic
do not work at all, I have to 'compile' the original proprietary drivers
downloaded from ATI's website using the instructions on the Linux ATI
Wiki:
http://wiki.cchtml.com/index.php/Ubuntu_Gutsy_Installation_Guide#Method_2:_Install_the_Catalyst_7.12_Driver_Manually

I have the problem that Compiz freezes completely (no Ctrl+Alt+Backspace, no 
Ctrl+Alt+F1 to a terminal) after about 30 seconds after logging in. The mouse 
is still active and can move around, but cannot interact with the desktop at 
all.
The only solution is to hard reboot the computer on the power button and 
usually after two or three attempts, everything works perfect and continues to 
do so all day. (!)

In other words, the freeze ONLY occurs right after login, or it does not occur 
at all. And it ALWAYS occurs after a PROPER shutdown.
I can only assume that when the computer freezes and I cut the power and 
reboot, something that was not loaded properly the last time goes into some 
failsafe or default mode, which actually makes Compiz work as it should.

I have never managed to get Compiz working after a proper shutdown on
this machine, it's only when I reboot it in mid-login that it has a
(small) chance of working correctly on the next startup.

-- 
X freezes when compiz is enabled on ATI cards
https://bugs.launchpad.net/bugs/108527
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