The fact that you are using ATI is a very bad indication in the world of Linux...sorry to report that ATI really really sucks on Linux, and could very well be the problem. If you can, borrow an nVidia and test it out to see if that works. Even if you do eventually fix this problem, and it's not because of bad ATI drivers, I highly recommend picking up a nVidia if you can afford it.
Sorry to be a bearer of bad news
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