I am using the same card as well, and no, you aren't getting all the features using a VESA driver. You have no DRI and can't run any OpenGL apps.
Let me first warn you that you may want kill the auto x start if you have it turned on. Due to the issue mentioned at the end, I start x manually.
Make sure the radeon configuration in your kernel is module, not yes, then download the ATI drivers from gatos.
Install them and copy radeon.o to the /lib/modules/2.4.22/kernel/drivers/char/drm/ directory (make sure you copy AFTER you've recompiled your kernel if you end up doing this). Then modify your /etc/X11/XF86Config file. Here's the relevant info from mine:
Option "AGPMode" "4"
Option "NoAccel" "Off"
You can check to see if all is working by starting x and then running glxgears (should see a jump in FPS) and by running glxinfo. Look to see if direct rendering is enabled. Easiest way would be to run:
glxinfo | grep rendering
If it comes back saying "direct rendering: Yes", then you're new driver is installed and running.
Now, one last thing. The driver "sux a$$"! For the last year I've not been able to get rid of the "jitter" effect that occasionally occurs. You'll notice this pretty quickly. Simply <ctrl>+<alt>+<bkspc> to kill x and then restart. Sometimes it doesn't happen for a week, sometimes I have to restart x multiple times to get rid of it.