Since Ubuntu Jaunty (9.04) I can't use official ATI drivers anymore, due to the fact that the latest drivers don't support my card (ATI Mobility X2300) and older drivers don't install properly on Jaunty.
1. However, dual screen can be configured out of the box. Start your X server with both screens turned on. Start up the Display utility, and deactivate the mirror option. Try to setup a resolution for each screen. It will ask you to logout and when you login again, you'll have to reset the resolutions but this time you won't have to logout.
2. But there's still a problem: the maximum resolution you can use is the smaller screen resolution. At this point you have to manually edit your /etc/X11/xorg.conf file and make a small change. Edit the following section:
SubSection "Display"
Virtual 2960 1050
EndSubSectionAnd set the right maximum size of the extended desktop. I have a 1280x800 and a 1680x1050.
3. Logout and login back again. Repeat step number 1.
With this method, I'm using the open source radeon driver and I have some 3d capabilities. Not sure about games or heavier 3d apps, but I have desktop effects. I also have XVideo output.
Screenshot: jauntyshot.png
This is a useful link if you'd like to better understand XRandr and how to change some options if you need to: http://wiki.debian.org/XStrikeForce/HowToRandR12