I see this problem as well, but not 100% of the time.  It seems that I
can get usable 3D performance with KMS if I reboot with
radeon.modeset=0, select "Normal" for Visual Effects, then reboot again
with radeon.modeset=1.  It's still not great compared to when KMS is
disabled but much better than if I boot with KMS enabled then start
compiz after logging in.

I have been able to use this workaround twice now after running in the
slow desktop problem.

-- 
[KMS][RV530] compiz very slow on AGP hardware
https://bugs.launchpad.net/bugs/496653
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