Hm, must admit I don't know about ATI.
If it will help, I will post the relevant part of my xorg.conf file. At least, it might give you an idea on how to search further.
Firstly - if you haven't done this already - you will probably need to install the propriety ATI driver that matches your graphic card (have a look in Synaptic for a match).
The following applies to Nvidia, so treat it as a guideline only!
(* Before making any changes to your xorg.conf file, make sure you back it up first! *)
As root, edit etc/X11/xorg.conf.
Under the 'Device' section, set
Option "DynamicTvinview" "true"(If I remember correctly, this only needs to be set if you plan to change between one- and two-display modes real-time.)
In the 'Screen' section, I have this:
# Viewport 0 0
Option "TwinView" "1"
Option "metamodes" "DFP-0: 1920x1200_60 +0+0, DFP-1: 1920x1200_60 +1920+0;"
The 'DFP' refers to your type of monitor, in this case LCD. (I think it actually refers to the connection type, i.e. DVI, but I am a bit rusty).
You would, of course, change the metamode line to your resolution (1280x1024).
The '_60' is the refresh rate, change it to match yours.
The last '+ 1920' is the x-offset of the second monitor (yours should then be '+ 1280'), '+ 0' the y-offset.
The biggest caveat is that I am not sure that ATI calls the setup for twinview, it might be only Nvidia.
I hope someone with more ATI experience will come by and help you out soon! Sorry I could be of no more help.