Just go into your display settings in your control panel and enable both monitors and set the resolution and arrangement that you want. It's pretty self explanatory when you get to the Display Settings.
Well, I can see those self-explanatory driver settings, though I can only set one resolution - this is then applied to both monitors. how is the explaination to setting a resolution for each one, details please
I'll take a shot in the dark and guess that you are using XP?
I had a very similar problem that I posted here years ago....
I was able to finally get it to work but I'm not too sure how I did it so I will give some hints and hopefully they will help.
1. Change what monitor is the primary (the one listed as "1"), I know it sounds stupid but I remember that was somewhat of the culprit.
2. Download the Radeon graphics driver suite and try changing the resolutions from the ati program and not the windows options
If I remember correctly, it took lots of trial and error attempts and I think I was only able to do it with the larger (or smaller) monitor as the primary monitor. It was not the ideal solution for me, but at least I was able to view each monitor with its native resolution.