Comment 8 for bug 363139

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Andreas Setterlind (gamester17) wrote : Re: xbmc not working with opensource radeon driver in jaunty

This is not a XBMC bug; XBMC requires full 3D OpenGL 1.4 with GLSL and ARB support, the open source radeon driver does simply not support that yet.

Read:
http://xbmc.org/wiki/?title=XBMC_for_Linux_specific_FAQ#XBMC_for_Linux_minimum_requirements
and:
http://xbmc.org/wiki/?title=XBMC_for_Linux_specific_FAQ#Why_is_a_OpenGL_2.0_compatible_graphic-controller_the_recommended_minimum_for_XBMC.3F
as well as:
http://xbmc.org/wiki/?title=XBMC_for_Linux_specific_FAQ#Currently_OpenGL_2.0_hardware_is_only_needed_for.../

So until the open source radeon driver supports full 3D OpenGL 1.4 with GLSL and ARB support, you need to use the latest ATI restricted driver (meaning the closed source binary driver from ATI). You can follow these instructions for help on installing the latest restricted drivers:
http://xbmc.org/wiki/?title=XBMC_for_Linux_specific_FAQ#How_can_I_sort_out_graphic.2Fvideo_issues_in_XBMC_for_Linux