for ATI in Linux visit www.rage3d.com
I will suggest Kanotix. It really blows knoppix away. ONce you install it go here www.kanotix.com/files and download the scripts for kernel vanilla sources and then the radon script.
ctrl alt f1...
why don't you try a Iinux Live CD ( boots off cd then loads the OS in your ram)
to test your hardware? THis way you will know for sure if it a hardware fault or software.
for wireless you need ndiswrapper
It is very easy to set up.
As for the right distro for the first time .... go with Debian Sid
it is not all that easy but much better than any rpm based one.
knoppix... kanotix... ( i prefer...