Your xorg.conf will have the settings you need to change for your screen resolution. Its under the SCREENS section. You'll see a bunch of resolutions. 1024 x 768 should be listed before 800x600, I believe thats the highest resolution by default which means you probably need to get the driver for your card.
Also go to your command line and post the output of lsmod (this will list your loaded modules)
Your ATI card can be very tricky to get working correctly. ATI provides a linux driver for some of its cards but i'm not seeing yours. http://ati.amd.com/support/driver.html
I had a ati Radeon Xpress 200m on my laptop and it took a lot of work to get the 3d rendering working properly. ATI isn't the best choice with Linux IMO. I recently bought a NVIDA card and completely painless driver install and it fully worked. The total install time for it was around 1 hour +/- 30 min. I love NVIDA's support for Linux.