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did you uninstall the original drivers you had on there with the catalyst uninstaller utility before you installed the new drivers? if not, get the catalyst uninstaller and run it, and make sure that after you reboot windows has that aweful looking 8 bit color and 640x480 resolution. if it doesn't and it's still looking like a normal desktop, run the utility again, and try to get the last bits of the driver off your system.
when it finally does boot into the ugly desktop, install the latest drivers again, let all the WDM capture drivers and controll panel install and everything, reboot the system when prompted and see if it's fixed.
if by chance you did use the uninstall utility the first time around, try seeing if going back to an older set of drivers helps. guru3d.com keeps an archive, and you can dig them up from the ati site as well, but that's harder than just hitting guru3d.
good luck!
ps if it's happening on any game you play, then disregard, but if it happens only on a specific game, check for game patches.
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