Okay i just fixed it... Took ages and saw lots of bluescreens for god knows what reason :S
For other ppl that may have same problem, I'll list what ive done to get thru it.
To go thru "Application Install: install package failure!" error message, simply uninstall 'microsoft visual c++ 2010 redistributable' that comes with win7 sp1 from windows add/remove programs.
Next if you have problem with INF file,
1. After seeing the "Driver install: the INF file was not found" error message,
use Device Manager to update the driver, navigating to the C:/ATI directory and checking the "search subfolders" box.
2. Reboot the computer.
3. Run Catalyst installer, but this time, select uninstall and get rid of everything.(Just select express)
4. Now reinstall Catalyst using the driver installer as you would. It should work fine. At least it did for me >.<
God it was pain in the arse doing this... took like 3hours to figure this out lol
Thanx for the replies bystander =]