ATI gpu driver fails to install, says Windows does not support it  

First of all, here is my DxDiag: DxDiag.txt

So I purchased a new monitor yesterday (Asus VX238H-W), but I have this black border all around the edges. It is already auto-adjusted so that is not the issue. I am already running 1920x1080 as supposed, so I couldn't figure what was wrong initially. After doing some research about the issue, I found out that you need to change the scaling via. Catalyst Control Center.

Now, my problem is, that my graphics card does not show up in Catalyst Control Center (meaning I don't have the option to scale), and when I try to download the newest driver it says the following:

Packages for install
AMD Display DriverFinal Status: Fail
Version of Item: 8.970.100.7000
Size: 90 Mbytes

HDMI Audio DriverFinal Status: Fail
Version of Item: 7.12.0.7708
Size: 1 Mbytes

And further down in the report it shows why it failed:

Error messages
Driver Install: Windows® version does not support this operation
Driver Install: Windows® version does not support this operation
Driver Install: Windows® version does not support this operation
Driver Install: Windows® version does not support this operation

I honestly don't understand why it says that my Windows version does not support it, because on AMD's homepage there is a driver section for Radeon HD 46xx series for Windows 7 32bit.

Also to note: When I use AMD's driver detector instead of doing it manually, it says that my driver is already up to date (?).

Here are some of the different things I have tried to do:

1) Install the recommended driver
2) Install the beta driver
3) Install an older driver
4) Run Driver Sweeper, reboot, run it again, search for all files called AMD/ATI and remove them, and then installing the recommended driver. Same problem.
5) Install in safe-mode
6) Install a Vista driver (I got desperate at this point )
7) Install a 64bit driver
And probably other things I can't remember.

It is not specified in the DxDiag as far as I know, but to be more specific my graphics card is a Radeon HD 4650 (Yes it is old as hell, I know).

Any help appreciated!

Oh, and here is how my Catalyst Control Center looks like:

AMD Phenom 9650 Quad-Core Processor - 2.30 GHz
4GB RAM
ATI Radeon HD 4650 GPU
ASUS VX238H-W Monitor

It should all be listed in the DxDiag.

@JaneSpring - Yes it did, and I have also tried to manually install the graphics driver from there, it said "successfully installed" or something, but nothing changed, still no options to scale in CCC.

No.

No, the CCC did not work before that either, but on my old monitor I did not have the black border so I didn't really do anything about it.
I don't know what version I used, sadly.
I have always had this issue with CCC but it just didn't give me a black border like now.

Do you think a fresh install would work? As in wiping the whole HDD?
I would do anything in the world to fix this.