i have a very similar problem, and it just might be that things got away from the real problem here. I have the 9800XT from ASUS installed in my system and i'm trying to set up a dual-head mode for my CRT- and DVI- out . My personal problem is that WHENEVER both, the CRT AND the DVI device are plugged in, the DVI one is handled as the primary display. In the fglrxconfig tool theres no option to set "CRT, DVI" like i'd need it, only "DVI, CRT", wich makes the DVI primary. And i dont know how to set it right manually.
Now for your problem you should check first if u're stuck in the same boat as me. Is your monitor really handled as the primary display? Because FraserGJ is wrong i think. The overlay video isnt displayed in the primary but on the SECONDARY device. Its the same way in windows. Thats what overlay in clone mode is all about, so u can work on on ur Monitor and watch movies on ur secondary display. There are 2 ways to check if u're TV is the primary display. First, unplug ur TV, restart Linux and see if the video is displayed on the monitor afterwards. The second, and easier way is to just hit the logout button ind the KDE menu. In my case, the logout screen (where u choose to logout, reboot, etc.) is ONLY displayed on the primary display, wich is the DVI for me and should be the TV for you.
If one of these apply to you your stuck with the same problem as me and the ATI drivers have a serious bug. Wich is that whenever two devices are plugged to the Card the CRT ouput is handled as secondary. I could, in some way understand this for DVI because most ppl would probably choose a digital out over an analog one, but for the TV out this would be ridiculous.
Furthermore if ur problem comes out to be the same as mine u should rerun fglrxconfig and make sure there's no "TV, CRT" mode to choose. I'm currently not at home and can't check it. If there is, try it!
And plz report ur findings.