download the latest drivers from ATI click here
try un installing the ati driver from add remove programs and restart your computer. this will set the desktop to defaults [email protected] again. when you get to the desktop windows will find the graphics card again and prompt you to install drivers, click cancel twice and click your downloaded drivers to install the drivers and restart the computer again.
the desktop will still be set to 800x600 so right click an empty area of desktop/properties/settings and adjust the slider to 1024x768 again and click apply. next click advanced/monitor and tick the box that says 'hide modes this monitor can not display' then from the drop down list, select the highest refresh rate shown and click apply and ok.
if doing the above doesnt work try downloading driver cleaner click here then un install the drivers again as above and boot into safe mode and run it as per instructions and install them again maybe.