I guess what would be a weekend without another re-install of Ubuntu to TRY and fix this.
I will try what you suggested, though I have one question and One Observation.
q?/ What Kubuntu 12.10 or 12.04 did you use? and for others is one or the other more likely to work with ATI HD3000/ AMD-ATI-Radeon 6xxxm 'Muxless' setups?
And Shiny I think you must have a 'Muxed' System, as only they have Cios options to switch between cards - in my understanding.
As it is I will try with Kubuntu 12.10, as I th9ink you used that because you referenced Kernel 3.7 whisk is closer to it.
Mark - Wish me luck
one Note: The Open Source/ Mesa-git which updates almost daily Is getting better constantly, and with Kubuntu's Plasma desktop, their is a game called LOL, which is working almost flawlessly now, and has had serious problems even a week ago and still even in Ubuntu.