You know, I'm starting to wonder about DirectX issues Bingo. I'm trying to wrap my brain around this one. OK, your card is able to support DirectX 9. These are the drivers you should be using if you haven't got them already.
http://ati.amd.com/support/drivers/xp/radeonx-xp.html
Man, this kinda stuff is hard to diagnose over the net. These drivers were relased Jan 10/07 so they are the most recent. Unfortunatley it does not seem to say what version of DirectX is included. Your card is designed for DirectX 9 but I think we are up to 9C or something like that these days.