I am probably just being redundant here, but this caused me some confusion, and it may help some other folks.
When I downloaded ATI's drivers, I first tried to run the setup.exe program. This does some work, then fails with two messages:
1) INF error Video driver not found
2) something about removing your current display drivers
The solution is rather simple. Instead of relying on the setup.exe program to do all your work, you should do what NightShade has been saying all along:
1) Go to your device manager (start -> settings -> control panel -> system. Choose Hardware tab. Click on device manager)
2) Expand "Display Adapters", and double-click the current display device (something like "Generic VGA" if you have not yet installed a driver, or "Radeon 9000" if you have)
3) Go to Driver tab, and click on Update Driver
4) Choose "Install from a list or specific location (advanced )", and click next
5) Choose "Don't search, I will choose the driver to install", and click next
6) Click "Have Disk", browse to the "Driver" directory of your ATI driver download, and click OK
7) From the list of supported video cards, select the second "Radeon 9000" (again, as per NightShades previous instructions)
Sorry if this was completely unnecessary, but it may alleviate future confusion.