Okay I got it.
Last night I got the ati to work correctly. I changed the xorg.conf to use flgrx as jdkaye suggested. I altered the lilo.conf to use:
append = "video=atyfb:mode:1024x768,font:SUN12x22"
Which was suggested by this guide: http://tldp.org/HOWTO/Framebuffer-HOWTO-5.html#ss5.6
in the "Got a ATI?" section. I also built a new kernel with a little extra support, although I only changed a few things. I was using the same guide which is outdated enough (2000) to leave me doing some guess work. I'm working under the assumption that this is not the ideal way to configure this system, but it's the first one that's worked.
I could tell you exactly the changes I made but I am away from his machine and I'd have to check the "diff /usr/src/linux/.config /boot/config-previous-kernel"
It was a hard fought battle last night but I coaxed the man's horrible machine into running multiple x sessions. Never before have I felt so accomplished as when I managed to get basic functionality out of that god damn box.
It's just that now wine isn't cooperating with me.