My understanding is that you need to enable KMS.
Based on some previous posts from other forumites, here is what I did on my laptop that has a Radeon HD2600:
I blacklisted radeonfb and radeon in /etc/modprobe.d/blacklist.conf:
# Stop radeon modules from loading too early:
I put this entry in /etc/modprobe.d/radeon.conf to enable KMS:
options radeon modeset=1
(You will probably have to create this file.)
I then added this right at the bottom of /etc/rc.d/rc.modules:
### Since we blacklisted the radeon module earlier we must now load it
Then I removed any "vga=" entries from my lilo.conf, because these should only still be used if KMS is disabled.
Here is my append line from /etc/lilo.conf:
YMMV. Hope that helps.