I usually just 'lurk' here but I have a couple of suggetions. Under DXDIAG you should be able to determine what release of direct X you have installed... you can find out the latest here
http://www.microsoft.com/windows/directx/
You might also see if the Unified Driver supplied by ATI will work for you... I would think the problem is related to, a defective card, bad or corrupt drivers or a DirectX problem... I know that is a broad statement but these are the things I would try. The ATI Unified drivers for XP (I am making that assumption are here
CATALYST Windows XP 4.12 - Driver Download .
Good luck!