I have a similar problem with an ATI 9700 (single LCD)
I installed kde 4.1 on top of Kubuntu Hardy, and proprietary drivers 8.7
If I log out and in again the screen is completely black, except for the mouse.
It must be a rendering problem, because when I move the mouse above the windows that should be opened at login (I mean: at the position where I expect those windows to be) the mouse changes shape correctly.
I have tried using the free 'ati' driver, but the rendering of windows is veeeeery slow, with some artifacts like black horizontal lines on the desktop background.
Too bad my life with ATI, at each xorg or fglrx release I get better performance (which I do not really use) and new bugs.