Important Warning: Installation of this driver requires removing the restricted-modules package in order to work. That package includes drivers for madwifi (Atheros wireless cards), nvidia cards, and a handful of other devices. I provide a work-around for the madwifi drivers, but you need to perform it before removing the restricted modules (jump to end of this this post).
When running the dpkg-reconfigure command you should answer the questions that you know and take the defaults for the rest. You might want to say no to the monitor detection--it has caused X-Windows to crash for some people.
Remove existing fglrx driver
Remove Breezy's included drivers if they are installed:
sudo apt-get remove xorg-driver-fglrx
sudo apt-get remove fglrx-control
sudo apt-get remove linux-restricted-modules-$(uname -r)
sudo dpkg-reconfigure xserver-xorg #select the "ati" module
Reboot.
Installing the new driver
Download the ATI driver installer: 32bit Installer
This guide refers to the 32bit version of the driver. If you are using a x86_64 System you need the 64bit Installer. The installation procedure should be the same as for 32bit, except some filenames will differ slightly.
Change to the download directory. Make sure that you have the universe and multiverse repositories enabled in /etc/apt/sources.list before doing these steps. Sample sources.list.
Install necessary tools:
sudo apt-get install gcc-3.4 module-assistant build-essential
sudo apt-get install fakeroot dh-make debconf libstdc++5 gcc-3.3-base
Create .deb packages:
chmod +x ati-driver-installer-8.23.7-i386.run
LANG=C LC_ALL=C ./ati-driver-installer-8.23.7-i386.run --buildpkg Ubuntu/breezy
Install .deb packages:
sudo dpkg -i xorg-driver-fglrx_8.23.7-1_i386.deb
sudo dpkg -i fglrx-control_8.23.7-1_i386.deb
sudo dpkg -i fglrx-kernel-source_8.23.7-1_i386.deb
Remove any old fglrx deb's from /usr/src/:
sudo rm /usr/src/fglrx-kernel*.deb
Compile the kernel driver:
sudo module-assistant prepare
sudo module-assistant update
sudo module-assistant a-i fglrx
Update the xorg.conf file:
sudo aticonfig --initial
sudo aticonfig --overlay-type=Xv
Reboot.
Confirm that it worked
$ fglrxinfo
display: :0.0 screen: 0
OpenGL vendor string: ATI Technologies Inc.
OpenGL renderer string: RADEON 9700 Generic
OpenGL version string: 2.0.5695 (8.23.7)