Please post a copy of your XF86Config-4, and a copy of the X log. I am assuming when you installed the ATI drivers you made sure the module actually compiled and was able to be inserted into the kernel.
Check this out as...
Like I said there may not be 9700 mobile support in the driver yet - in which case you can change settings till you are old and grey - it wont work. You need to use the standard vesa driver to get 2d support if you want X.
When you say it doesnt recognise the card - what exactly are you referring to? Did you run fglrxconfig if so then if there is no 9700 option you might try 9600. The module in the XF86config-4 is fglrx.