Turning KMS on fixes this bug for me, introduces tearing. It also seems
to introduce freezes, though as Emmanuel Touzery wrote, it's hard to
know whether or not there would have been freezes without KMS.
radeon.agpmode=-1 fixes the tearing, but I'm still getting occasional
freezes.

-- 
(Needs KMS) Background and full screen apps don't show up when Normal Visual 
Effects on (Radeon 7500) 
https://bugs.launchpad.net/bugs/444139
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which is the registrant for xserver-xorg-driver-ati.

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