We are expecting to see KMS support for at least some ATI cards by the time the Karmic Koala releases. As part of that we have been playing with previews of ATI KMS support. As a kernel junky I have pulled the updates for ATI Radeon and applied them to the latest Karmic kernel and built some test kernels. Initial touch testing by the X-swat team seems to show that its not in that bad a shape.
With a whole kernel release to stabalise this stuff I am pretty hopeful that we should have something stable for Karmic. Of course that does rely on the support being merged in the v2.6.31 merge window, we shall know in the next few weeks.
If you are keen to try out ATI Radeon KMS you can find kernels with this enabled in my KMS PPA.