Re: Upgrade to Kernel 3.2
Kmathern is probably right. If you have an older AMD/ATI chipset the latest available driver that supports that card won't always work with 3.x kernels.
It looks like your card is considered a "legacy" card since it's trying to use the oldest supported fglrx driver.
You could try to use sgfxi to install the open source ati (radeon) driver.
sgfxi will set up some things a bit differently than xserver-xorg's autodetection does so it might work.