I'm hitting this as well.

I've been tracking gutsy for a few months now and last night the upgrade broke my Kubuntu desktop. 

the kdm login screen is fine but once KDE starts to load the graphics go really screwy.  All the icons seem to be 10 times the normal size and I only see a small portion of them, the base windows of the apps load but the contents of the windows is blank.   Although the apps appear to work the (broken) drawing is really slow.

I have upgraded all my X packages from here

http://people.ubuntu.com/~bryce/Testing/xorg-server-backports/
http://people.ubuntu.com/~bryce/Testing/ati/

But the problem still exists. 

Here's the contents of my xorg.conf which I generated with 

dpkg-reconfigure xserver-xorg -phigh

# xorg.conf (xorg X Window System server configuration file)
#
# This file was generated by dexconf, the Debian X Configuration tool, using
# values from the debconf database.
#
# Edit this file with caution, and see the xorg.conf manual page.
# (Type "man xorg.conf" at the shell prompt.)
#
# This file is automatically updated on xserver-xorg package upgrades *only*
# if it has not been modified since the last upgrade of the xserver-xorg
# package.
#
# If you have edited this file but would like it to be automatically updated
# again, run the following command:
#   sudo dpkg-reconfigure -phigh xserver-xorg

Section "Files"
EndSection

Section "InputDevice"
	Identifier	"Generic Keyboard"
	Driver		"kbd"
	Option		"CoreKeyboard"
	Option		"XkbRules"	"xorg"
	Option		"XkbModel"	"pc105"
	Option		"XkbLayout"	"us"
	Option		"XkbOptions"	"lv3:ralt_switch"
EndSection

Section "InputDevice"
	Identifier	"Configured Mouse"
	Driver		"mouse"
	Option		"CorePointer"
	Option		"Device"		"/dev/input/mice"
	Option		"Protocol"		"ImPS/2"
	Option		"ZAxisMapping"		"4 5"
	Option		"Emulate3Buttons"	"true"
EndSection

Section "InputDevice"
	Identifier	"Synaptics Touchpad"
	Driver		"synaptics"
	Option		"SendCoreEvents"	"true"
	Option		"Device"		"/dev/psaux"
	Option		"Protocol"		"auto-dev"
	Option		"HorizScrollDelta"	"0"
EndSection

Section "InputDevice"
	Driver		"wacom"
	Identifier	"stylus"
	Option		"Device"	"/dev/input/wacom"
	Option		"Type"		"stylus"
	Option		"ForceDevice"	"ISDV4"		# Tablet PC ONLY
EndSection

Section "InputDevice"
	Driver		"wacom"
	Identifier	"eraser"
	Option		"Device"	"/dev/input/wacom"
	Option		"Type"		"eraser"
	Option		"ForceDevice"	"ISDV4"		# Tablet PC ONLY
EndSection

Section "InputDevice"
	Driver		"wacom"
	Identifier	"cursor"
	Option		"Device"	"/dev/input/wacom"
	Option		"Type"		"cursor"
	Option		"ForceDevice"	"ISDV4"		# Tablet PC ONLY
EndSection

Section "Device"
	Identifier	"ATI Technologies Inc RS485 [Radeon Xpress 1100 IGP]"
	Driver		"vesa"
	BusID		"PCI:1:5:0"
EndSection

Section "Monitor"
	Identifier	"Generic Monitor"
	Option		"DPMS"
	HorizSync	28-70
	VertRefresh	43-60
EndSection

Section "Screen"
	Identifier	"Default Screen"
	Device		"ATI Technologies Inc RS485 [Radeon Xpress 1100 IGP]"
	Monitor		"Generic Monitor"
	DefaultDepth	24
	SubSection "Display"
		Modes		"1400x1050" "1280x1024" "1024x768"
	EndSubSection
EndSection

Section "ServerLayout"
	Identifier	"Default Layout"
	Screen		"Default Screen"
	InputDevice	"Generic Keyboard"
	InputDevice	"Configured Mouse"
	InputDevice     "stylus"	"SendCoreEvents"
	InputDevice     "cursor"	"SendCoreEvents"
	InputDevice     "eraser"	"SendCoreEvents"
	InputDevice	"Synaptics Touchpad"
EndSection