video corrupt after XP SP2 install - stuck in 4 bit - was ..

Hello all (and HELP!)

Daughter got a virus, had to reinstall XP Home edition. Had SP1, installed
okay, but then as soon as it downloaded SP2, video went corrupt with vertical
stripes accross the screen. Went out an bought new SP2 CD, thinking it was
the result of patches. Even after reformat, and reinstall with brand new
(genuine MS) SP2 CD, as soon as it boots from hard drive after installation
video goes corrupt and is stuck in 4 bit 480x640 resulution. It is really
strange, the boot from CD on install shows the logo perfectly, but when it
boots from HD, the blue progress bar under the logo starts writing outside
the boundry.

Tried multiple drivers from ATI site (and multiple fresh reinstalls), XP SP2
does not seem to correctly load the driver. Boot in safe mode shows same
corruption. It was working before and it works in SP1 (so doesn't seem to be
video card), what changed that would cause the drivers to not load in SP2?
The hardware hasn't changed, even tried refreshing BIOS to optimum settings
(in case it was corrupted by virus).

I have a Matsonic MS9773C motherboard, Pentium 4, Award BIOS v6.00PG.
Video card is ATI Radeon X800 XT

Does SP2 need special BIOS settings or adjustments due to new features? Are
video drivers handled differently in SP2? What do I need to do to
troubleshoot this problem? I have already spent over 100 hours and $$ trying
to get this computer back up and running.

HELP!