3D drivers and performance in Linux gets most of the attention it seems - which is unfortunate. I can only speak for myself, but most of my work in linux is with 2D, not 3D and I have to agree with you - ATI 2D performance blows.
I had always used nvidia cards and had seen it written that the kernel nv driver gave better 2D performance than the prop. nvidia driver. I don't think I ever saw a difference myself. The nvidia cards worked well regardless.
I'm one of those people that attracts free PCs. Usually "broken" boxes that I manage to fix quite easily. As a result, I'm often stuck with hardware I might not have chosen otherwise, but I keep myself and 2 kids with working computers so I can't complain.
This is how I ended up with a string of ATI boxes. Like you, I could not understand the piss-poor 2D performance in X, but I never found a solution in the configuration options. One example that drove me nuts was the lag when I dragged XMMS around the screen. Another was the repainting of the desktop when a browser was open. Just horrible. I also had issues with transparent terms.
The only box I have now that I actually purchased is a Dell laptop with - yes - an ATI Radeon X1400 card (at the time nvidia was only on the AMD setups
). 2D performance is, again, not great, but not as bad as past experience with ATI. Perhaps it's the card, or the CPU, or the RAM, or some combination. It still is not as good as I think it should be. My card is finally supported by the open radeon driver, but I did not notice much difference between the 2 in 2D and stuck with fglrx.
I'm running slackware 12.1 on my newest freebee - a HP/Compaq desktop business PC. This thing is as low budget as it gets. Everything is on-board and there is no AGP slot to add a separate card. Even if there was, the cards would be too tall to fit in the case. The video is an Intel 82865G integrated graphics chip running on the i915 driver. Motherboard chipset is ICH5. The intel 2D performance is superior to the ATI 2D performance and the DVD video is also
far superior to the results I get when I play a DVD on the Dell. 3D on the intel is not so hot (of course), but I can play Foobiliards and Neverputt just fine. GoogleEarth works great too.
So, that was my verbose way of saying I think ATI blows as a 2D card.
Hopefully someone will make a suggestion that helps you more than this.