Ubuntu – How to use two video cards to power three screens

This steps worked for me and what you probabably should do is upgrade you ATI drivers. They have solved a lot of those issues you're facing on.

http://www.upubuntu.com/2011/12/how-to-install-amd-catalyst-1112-linux.html

For smooth installation, it is recommended to uninstall currently availabe Catalyst driver. To do this, use these commands from the terminal:

sudo apt-get remove fglrx*

To install the AMD Catalyst 11.12 Linux driver now on Ubuntu 11.10 (32-bit & 64-bit) or any older version, run this sequence of commands:

cd ~/;
mkdir catalyst11.12; 
cd catalyst11.12/

wget -O ati-driver-installer-11-12.run http://www2.ati.com/drivers/linux/ati-driver-installer-11-12-x86.x86_64.run 

If you have a 64 bit system, then install this before anything

sudo apt-get install ia32-libs

After that you can start installing the new ati driver:

chmod +x ati-driver-installer-11-12.run 

sh ./ati-driver-installer-11-12.run

Make now an update for the X.org file with this command:

sudo aticonfig --initial -f

sudo reboot

Hope this helps.

This is happening because the radeon module is taking control of the device before pci-stub, so you need to reverse the load order.

Blacklist the radeon module:

$ echo blacklist radeon | sudo tee -a /etc/modprobe.d/blacklist.conf

And add the module to initramfs:

$ echo radeon | sudo tee -a /etc/initramfs-tools/modules
$ sudo update-initramfs -u

After, reboot. Problem solved!