That method should work with the hotfix driver but it also works well for the normal non-hotfix Catalyst driver too, even though the card is AGP. I don't use hotfixes any longer as they haven't been necessary for many months.
The only thing I can think of is that you're using the wrong .inf in either the wrong folder or right one. (Or again, could be chipset but I'd try this first.)
Download the normal Catalyst 9.9 32 bit for Windows 7 and extract it to C:\ATI.
Here is the .inf you should use. Download it and copy/paste it directly over the existing one in C:\ATI\Support\9-9_vista32_win7_32_dd_ccc_wdm_enu\Driver\Packages\Drivers\Display\W7_INF RapidShare: 1-CLICK Web hosting - Easy Filehosting
Now install using device manager the same as you did before.
Here is a link mirror in case the first one is downloaded too much and can not be downloaded any longer - http://***************/files/296193922/CL_87738.inf.html