What you need from freedesktop.org:
1. xorg 6.9/7.0 (cvs >=20060128)
2. Mesa 6.5 (cvs >=20060128)
3. DRM DRI (cvs >=20060128)
Pull Xorg from CVS!!! You have to do this to get the patches that fix a few problems found after the 6.9/7.0 release.
What you will find is that you have the latest Radeon R200 and R300 DRI drivers now with a better Xorg version than most distros provide. The key part to look at is the R300 DRI folder of the Mesa 6.5 directory.
Just make sure you are NOT using the pre-released versions of Xorg 6.9/7.0... that would be a bad and very buggy thing to do. Start with only the STABLE release of Xorg 6.9/7.0 and then use the CVS version
>=Jan 28, 2006 to get the best results.
As for the Pegasos II, the ATI 9250 (128-bit) is still an excellent graphics card. If you can get good performance and no weird visual artifacts in flight simulators like GL-117, FlightGear as well as games like glTron, Chromium BSU, Neverball, and Armagetron Advanced then you're doing pretty good with what you got.
Good ATI Radeon cards to test in the R300 family: 9800 Pro All-In-Wonder (aka "AIW", w/ Universal AGP 3.0 Connector). If you can find an Radeon 9500 Pro or older 9700 cards then you'll be in good shape as well.
Good Luck!
~Ken Mays