The same problem here, with the following Radeon device:

VGA compatible controller: ATI Technologies Inc Radeon HD 2400 XT (prog-if 00 
[VGA controller])
        Subsystem: Rioworks Device 2073
        Flags: bus master, fast devsel, latency 0, IRQ 47
        Memory at f0000000 (32-bit, prefetchable) [size=128M]
        I/O ports at 2000 [size=256]
        Memory at fa000000 (32-bit, non-prefetchable) [size=64K]
        [virtual] Expansion ROM at fa020000 [disabled] [size=128K]
        Capabilities: <access denied>
        Kernel driver in use: fglrx_pci
        Kernel modules: fglrx, radeon

See the attached Xorg.log for more details.

Xorg works fine when booted with an old kernel, tested with
2.6.38-8-generic

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https://bugs.launchpad.net/bugs/782297

Title:
  X Window not starting with Natty on Notebook with Mobility Radeon HD
  2400

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