Comment 41 for bug 426582

here is how I work around this bug on a Radeon Mobility M6 LY with only 8MBs of vram:
first of all, it's a good idea to install the latest driver from the xorg edgers drivers only ppa:
xserver-xorg-video-radeon 1:6.12.99+git20091125.0061c4db-0ubuntu0tormod2
then we need to optimize our settings to fit in the low memory:
-set the screen depth to 16 bits. on these old displays it's just barely noticeable, I highly recommend this because of the advantages.
-set virtual size to your screen size, if you don't use external display.
these must be enough to use DRI on EXA (compositioning, readable notifications, etc.) perfectly, if you have 16MB or more ram.
i had to do some additional tuning, because with EXA I had problems with font rendering (black pixel garbage around fonts)
the key to the solution is the FBTexPercent option in xorg.conf. with it, you can add extra memory to EXA at the expense of OpenGL textures. setting it to 32% made the font garbage go away for me.
see my attached xorg.conf
please mind that the other options that work for me (fastwrite, acceldfs, etc.) may cause problems on your machine.
and one last hint:
if you manage to enable DRI, you can gain a little more power by enabling HyperZ in driconf.