For the owners of the older ATI hardware, particularly the Radeon X1000 series, your day-to-day usage may not be impacted unless you use the system for gaming or need aggressive power management. You will be fine for a few months, but after that when your kernel and X server become outdated, the Catalyst driver will not be an option. By then, however, hopefully the Gallium3D, DRI2, and kernel memory management areas will be in good standing for ATI hardware.
This legacy driver may or may not end up having X Server 1.6 support. If the legacy driver doesn't end up containing X Server 1.6 support, starting with the round of Q2'09 distribution updates (such as Ubuntu 9.04) there will be no Catalyst support for the R300/400/500 series and immediately you will be forced to either not upgrade your distribution or to use the open-source stack.
If you are using a Radeon R300/400/500 graphics card in a desktop system that is mostly used for desktop applications, you should not have much of a problem switching to the open-source ATI stack. Compiz will work just fine and the 2D performance is great and can actually beat out the proprietary ATI driver in many operations, as is illustrated by the included test results. If you are into a lot of gaming, it may just be time to upgrade. Graphics cards like the ATI Radeon HD 4670 are quite affordable these days and even the Radeon HD 4850 and Radeon HD 4870 have come down in cost.
The area we wish though would have matured in the open-source ATI stack before AMD made this decision to drop the R300/400/500 support in the Catalyst driver was to improve the GPU power management capabilities, as that will be a problem for some users. At least, however, there is work underway in improving GPU power management.
While some ATI customers may feel disgruntled over the support being dropped on the R300/400/500 series, overall this is a good, strategic move. This will allow AMD to focus on bettering their support for the newer graphics processors and other products to be released in the future by narrowing the coverage of ASICs they need to test and support. While AMD may not be channeling greater resources to the development of their open-source drivers, at least the greater adoption of this driver should result in more testing and feedback to the driver developers. This Catalyst change is present on both Linux and Windows platforms.
Your thoughts on this decision by AMD can be shared in the Phoronix Forums where questions about ATI Linux can also be asked.