Thank you, irq. The reinstall of the application from the macosx-ati-display-4-5-7.dmg the problems are gone!
I had the problem s of "pixel debris" near the mouse pointer AND the machine going into beach-ball on waking up (no response to any input except power cycle) AND Time Machine screen issues (split background - swapped, jerky movement, couldn't use it for anything, Apple case #86433168)) because of the same reasons (upgraded to the ATI 9600 Radeon PC/MAC card to support the 30" cinema displays). Now all 3 problems are solved with the reinstallation (haven't had a chance to test out TM screen fully for response since I only have the first snapshot backup now - don't ask). Interestingly, I had the ATI ROM Xtender in the right place, but still had the problem (see
http://discussions.apple.com/thread.jspa?messageID=5705629#5705629 ) for that discussion.
When I moved the user account over from Tiger back up, the ATI display panel etc. came over to Leopard, but some items were grayed out in the SysPref ATI controls. Also, I had to use Safari to download the dmg file.