Think you will find that the problem is the chipset on your motherboard (ULi) is unsupported (or has very limited built-in) support in 7. Managed to find the specs for your motherboard,
ASUSTeK Computer Inc.
and it hasn't seen a
driver update of any kind in over 5 years. That said I have a feeling that the reason you are having problems with the actual ATI
driver is due to the lack of a proper AGP
driver. Would explain why it works with the default driver, but not once you install the ATI driver.
It also doesn't help that Nvidia bought ULi a couple of years ago, and then promptly dropped all support for it. The last ULi driver from Nvidia is over 3 years old, and only has support for up to one of the beta releases of Vista (Beta Build 5320).
Hopefully someone else will have a better suggestion but with what I can find about your hardware (not necessarily your video card, but the motherboard and lack of support) you have two options,
1. Run 7 on it, but only with the default
drivers.
2. Stick with XP until you have a computer that is more up to date hardware-wise.