I've got exactly the same problem and seen quite a lot of posts on the net, just like yours. It seems it's a bug in the driver and with radeon 9200 (at least) it causes such effects..I haven't found an answer yet; if you cut off the tv-out (I'm not sure if it's just a software thing or if you need to plug the cable off too) then your screen should be back to normal (or so many of the posts on the net says); the problem seems to be related to the tv-out that somehow makes your computer screen go wild.
Unless you can solve the problem, you must
1) use another driver, such as "ati" which gives only Mesa rendering (not good) or
2) give up using the tv-out and only enjoy your pc screen
3) buy another card; newer radeons tend not to have this problem I've heard (neither some of the older ones; my card is 9200SE and seems the 9200 series has this bug)