AGPSize did not help me, nor turning off all effects. Video card worked
well with 9.04. Fresh install of 9.10 resulted in a max resolution of
1152x864 - should instead be 1280x1024. Card info:

03:00.0 VGA compatible controller: ATI Technologies Inc RV370 5B60 [Radeon X300 
(PCIE)]
03:00.1 Display controller: ATI Technologies Inc RV370 [Radeon X300SE]

Downgrading drivers worked.

Wallpaper and everything was always visible, just had wrong resolution.

-- 
(Needs KMS) Background and full screen apps don't show up when Normal Visual 
Effects on (Radeon 7500) 
https://bugs.launchpad.net/bugs/444139
You received this bug notification because you are a member of Ubuntu-X,
which is the registrant for xserver-xorg-driver-ati.

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