I"m fairly certain this has something to do with some bugs in the mesa implementation. Some newer mesa doesn't seem to like freetype for fonts, which is something not that many games use. The reason switching to other drivers like the nvidia driver or the fglrx driver work is because they use their own gl implementation instead of mesa. Sure ati's is bad but it works okish.
Now why do you NEED desktop effects? Is it something you simply can't live without?