Conclusion: this is my config

As a conclusion, this is my version of the Device section in xorg.conf. I'm running this on an MSI Megabook M635, with an ATI Radeon Mobility X700 with 128MB dedicated VRAM, and with a native resolution of 1280x800.

Section "Device"
        Identifier  "Card0"
        Driver      "fglrx"
        VendorName  "ATI Technologies Inc"
        BoardName   "Radeon Mobility X700 (PCIE)"
        Option      "VideoOverlay" "on"
        Option      "OpenGLOverlay" "off"
#       Option      "OverlayOnCRTC2" "yes"
        Option      "Centermode" "on"
        Option      "XaaNoOffscreenPixmaps" "on"
        Option      "UseFastTLS" "2"
        BusID       "PCI:1:0:0"
EndSection

Software versions are:

• Gentoo Linux 2007.0 with kernel 2.6.22-gentoo-r8 with Reiser4 patches.
• Xorg 7.3.0.0 (ebuild r2)
• ATI driver 8.443.1 (ebuild r1) (aka release 7-12).