Richard, you said you were able to build fglrx. Did you make something special ? I also tried without module-assistant, but cannot figure out why it is lookingfor Makefile.lib.c file.
That module builds fine for me, in fact so far it's the only one that does against 2.6.16. bcm5700 doesn't, thinkpad smapi doesn't, nvidia doesn't (though that's because of something in the nvidia driver itself, not the kernel headers package).
While in 2.6.15 I did: m-a clean all m-a -l 2.6.16-1-686 - update - prepare - select - - get - - build - - install
sudo module-assistant -t build fglrxWarning, /usr/src/linux-headers-2.6.16-1 seems to contain unconfigured kernelsource!
I do still get this warning, and it is probably part of the problem, but it seems the flgrx module builds differently (i.e. doesn't use the kernels own module build makefile) so it does work.
To avoid this bug getting distracted if you still can't get it to build I'd raise it against that component, and if it does relate to this bug then the maintainer can hopefully draw some attention to this one. So far there has been no response from any of the kernel team to this bug.
Richard.