Comment 14 for bug 394263

I have the same problem (using 2.6.31 kernel, 3d is not working using radeon x1600 with the radeon driver) and I found a solution:

appending this to the kernel parameters fixes the problem:

radeon.modeset=1 video=radeonfb:1280x1024-24@60

Now I have dri, all desktop effects enabled, a nice transation from console to X, and averything work very well.

Removing video=... or setting it at 32bit depth make dri unusable and cause some other problem switching from console to X or viceversa...

andrea@sibilla:~$ uname -a
Linux sibilla 2.6.31-5-generic #24-Ubuntu SMP Sat Aug 1 12:48:18 UTC 2009 i686 GNU/Linux

andrea@sibilla:~$ lspci | grep VGA
01:00.0 VGA compatible controller: ATI Technologies Inc RV530 [Radeon X1600]

I'm using ati/radeon X driver, without xorg.conf...

I hope it help you too, and if it work I think 24bit depth should become the default...