I had an 8500 AIW. I never got everything to work. Unfortunately ATI didn't really start making good drivers for Linux until the next generation of graphic cards.
I don't think that this is so much a problem of which distribution as whether the ATI drivers for Linux will work very well. Here is the web page to get the official drivers.
One page is for 32 bit Linux and the other is for 64 bit Linux. The only clues about distribution here are that the driver that you probably want to use is for X.org and that driver is in rpm format. So you want to use a distribution that has X.org v6.8 or higher and that can install rpm format software archives. That includes a lot of distributions. The rpm based distributions that come to mind are Fedora and OpenSuSE. ( fedoraproject.org and opensuse.org ) I'm running Fedora 10 on one computer now and I have run OpenSuSE in the past. I strongly dislike both distributions.
The other video functions may be available if you use this very old open source driver called GATOS.
If you are like me then you probably hate to discard a working graphic card that cost $500 when it was new. Nevertheless I finally parted with mine. Getting a newer card could be a lot easier than getting the 8500 to work well under Linux.