You need to use open source drivers, since fglrx (ATI's driver) wont work with that card unless you opt to run an earlier Ubuntu release (9.04 and older). Karmic should provide some level of 3D acceleration for your card with the radeon driver (loaded by default so you shouldn't have to modify anything). It's better (and easier) to just use the xorg-edgers packages and the latest kernel, since that will allow you to run rather current code. Use this repository for drivers and necessary packages:
... and get your kernels from here:
Radeon is better than radeonhd in case you're wondering.