I have been able to solve the problem, thanks to an Ubuntu forum post. However, it might still be a bug, since not everyone will find the solution.
The problem was that the ATI flgrx driver failed to load with kernel -16, as of the time I originally posted this bug.
But flgrx still worked in kernel -15. Using kernel -15, hardware manager, I disabled the ATI restricted driver. Using synaptic, I obtained the envyng package and its GUI. From terminal, I used sudo envyng to download and install a new ATI graphics driver. Then I re-booted to kernel 16. At first, it was in the wrong resolution. But I enabled the new ATI graphics driver and re-booted again. All was well.
Someone suggested that afterwards, it helps to re-install compiz. I don't know.
I have been able to solve the problem, thanks to an Ubuntu forum post. However, it might still be a bug, since not everyone will find the solution.
The problem was that the ATI flgrx driver failed to load with kernel -16, as of the time I originally posted this bug.
But flgrx still worked in kernel -15. Using kernel -15, hardware manager, I disabled the ATI restricted driver. Using synaptic, I obtained the envyng package and its GUI. From terminal, I used sudo envyng to download and install a new ATI graphics driver. Then I re-booted to kernel 16. At first, it was in the wrong resolution. But I enabled the new ATI graphics driver and re-booted again. All was well.
Someone suggested that afterwards, it helps to re-install compiz. I don't know.