No, your vid card sould be fine, but your settings might be out of wack for that card. Try running xfconfig or what Redhat comes with and reconfigure the card. 2mb is pretty tight on resources, maybe running at 800x600x16 might be reasonable, rather than 24/32 bit color. See the xfree documents for configuring Xfree and even 'upgrading' to the latest X package/RPM.
http://www.xfree86.org/support.html
and
http://www.xfree86.org/current/Status29.html#29
and
http://www.xfree86.org/4.3.0/
(notice the version number)
Have fun! Caveat: There are 'many' types of S3 cards, right down the chip number off the card, and read your 'dmesg' output closely to see exactly what S3 chip you have, then compare that to the documentation/config's you are reading/setting up.