ATI graphics problem

Unfortunately ATI was always problematic with their Linux support. It seems like they aren't very interested in supporting Linux.

One suggestion would be to perhaps try the latest version of Ubuntu; a lot of things tend to get fixed with new releases.

How about the open source "radeon" or "ati" driver? That should work OK, as long as you don't run Compiz (desktop effects). Won't work for games, though, but should give you decent video playback.

Well in Jaunty I could not enable video card in restricted drivers and also I read that in Jaunty there is no support for ATI

     According to Ubuntu User magazine, which includes CD for 9.04 version, you can download proprietary drivers for ATI cards at http://ati.amd.com/support/drivers/linux... but I don't see anything like Xpress listed. Oh, wait... not looking EXACTLY like what you say, but go to http://support.amd.com/us/Pages/drivers.aspx and there are 2 "Crossfire Xpress" chipsets. Well, I'd say try searching their support website and see if there is a driver that fits your card. Magazine says you will have to do a 'chmod a+x' on the downloaded file if you find one, but then should be able to run it fine. Even says there is a GUI based installation and that the installer is capable of building a debian package.
     Try it and let us know. Other users may find themselves in similar situation.

Error: ./default_policy.sh does not support version
default:v2:i686:lib::none:2.6.28-13-generic; make sure that the version is being
correctly set by --iscurrentdistro

I installed Jaunty and that's all I got when I installed Ati driver I used 2 methods
1. using chmode 755 my .run ati driver and then sudo ./ my ati .run file
2, just typing sudo sh my .run file

The proprietary ATI drivers do not support your video chip in Jaunty: http://www.phoronix.com/scan.php?page=article&item=amd_r500_legacy&num=1