Same problem here with ati 9200SE card.  Worked very well in ubuntu
9.04.  I have changed to 16 bit colour to get wallpaper background to
show while using compiz, by using a manual edit to xorg.conf. The
important bits of that are here:-

Section "Device"
        Identifier      "Configured Video Device"
EndSection

Section "Monitor"
        Identifier      "Configured Monitor"
                        HorizSync       30-80
                        VertRefresh     50-75
EndSection

Section "Screen"
        Identifier      "Default Screen"
        Monitor         "Configured Monitor"
        Device          "Configured Video Device"
        DefaultDepth    16
        SubSection "Display"
                Modes           "1280x1024" "1280x960" "1152x864" "1024x768" 
"832x624" "800x600" "720x400" "640x480"
        EndSubSection
EndSection

-- 
Desktop background becomes black when desktop effects are enabled on GNOME and 
KDE
https://bugs.launchpad.net/bugs/462436
You received this bug notification because you are a member of Ubuntu-X,
which is subscribed to xserver-xorg-video-ati in ubuntu.

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