Hmm, sounds like the ati drivers want some things in your kernel, or some modules that you don't yet have. You can try a kernel compile if you want. I'm fairly sure this will fix your problem.
cd /usr/src/linux
make menuconfig
That will allow you to customize your kernel. The current config is for the kernel you have right now. Flip through the menus and see if you can find a graphics drivers section where there might be some ATI things you can select. If there is, highlight them and hit <M> to compile them as modules. Exit the config program via the menu, save the config and then type:
make dep && make clean modules modules_install
This will compile the new modules for you. Reboot your computer (don't HAVE to, but I don't know the names of the modules you just compiled, so we'll do it the "easy windows" way
). Once the new modules are loaded, try building the driver again.
Sidenote: That make dep &&... command I gave you compiles your modules only. If you wanted to compile a new kernel as well you'd type:
make dep && make clean bzImage modules modules_install
This will make a file called bzImage in your /usr/src/linux/arch/i386/boot (usually) directory. You can copy this file to /boot/bzImage and this is the kernel image your computer actually uses. Of course you probably don't want to overwrite your old one, so you could copy it as bzImage2 and then make a new entry in your bootloader program to give you an option.
end sidenote
Some day I'll be rich and famous for inventing a device that allows you to stab people in the face over the internet.