Comment 7 for bug 70501

FIXED!!
I have tried slune in feisty 7.04 beta and get the same problem I originally got with slune in edgy 6.10 and dapper 6.06.
After doing some investigation and thinking into what Henning suggested above I have found a solution that works for me. I can not use the proprietary drivers from ATI because my laptop's on board chip is too old, it is only a Radeon Mobility M6 LY. I looked into changing options in the radeon driver section in /etc/X11/xorg.conf but did not find anything that would increase my texture memory except for "FBTexPercent" which did not work. I then installed driconf from the ubuntu repositories and tried changing various direct rendering preferences and then running slune until it worked.
Only one option needed changed to set my maximum texture size from 512 pixels to 2048 pixels and that was under 'Image Quality' -> 'Support larger textures not guaranteed to fit into graphics memory' and then setting this parameter to 'Announce hardware limits' instead of the default of 'At least 1 texture must fit under worst-case assumptions'.
The corresponding entry in ~/.drirc is: <option name="allow_large_textures" value="2" />
This fix also helped me play 'Beyond the Red Line' demo which initially complained of not enough texture memory.
Slune now works fine though there is another bug when trying to play campaign mission 1 - I will file a separate bug on this.
I have attached my .drirc config file.