I have a fucking ati card at work too (didn't remember the exact model, sorry).
And guess what? I have exactly the same problem as you. Never managed to make it work. I tried building a package from the ati "run" script, or even directly installing the driver. I got exactly the same behavior: when X starts, I got blank (actually plain black) screen, with a cursor in the upper-left corner that disappear after one second. After that I'm unable to switch back to a console or do anything on it.
I didn't try to ssh from another computer, so not sure if it's a kernel oops or a kernel panic or a freeze or just Xorg which crashes. Hard to find time to install/test a driver, drop to a collegue computer to try to ssh to my machine, all of this while keeping working :/
I tried a bunch of different ati options for Xorg...none of them made a difference. I, of course, verified that my card is actually supported by this driver. I will post the exact model tomorrow if you want to know. Maybe it's the same model as jon-tee!
P.S. the free radeon driver works ok for me. I only have some glitches some times (vertical scrolling with the mouse for example), and there is no way to play quake2 at launch...way too slow.