After hours and hours of googling, support tickets etc etc I came across the holy grail, fountain of youth, .. you get the drift. Vista + ATI + SL = WORKAGE!
There is that fixes the problem mentioned above. Download the stationary card ati drivers for your respective vista (32 or 64 bit) at http://ati.amd.com/support/driver.html. Just pick a normal card. They all use the same driver I think.
Extract the driver but DO NOT INSTALL YET.
Make sure you have MSXML 4.0 from Microsoft.
http://www.microsoft.com/downloads/details.aspx?familyid=24B7D141-6CDF-4FC4-A91B-6F18FE6921D4&displaylang=en
If you have windows update running, you SHOULD already have it.
Download this mod tool: http://www.driverheaven.net/modtool/MobilityDotNET2.zip
Turn off UAC in the control panel -> User accounts and Family Safety -> User accounts -> Turn user account control on or off
Make sure it's off. Then reboot as prompted.
Now unzip (if you havn't already) the modification tool and run the app called MobilityDotNet. Point the browse at the unpackaged driver. Should be in C:/ATI/SUPPORT/drivername
For example: C:/ATI/SUPPORT/7-7_vista32_dd_ccc_wdm_enu_49713 for the 7.7 catalyst
Click modify, and let it work a while.
Then go to the driver directory. Click the subdir Driver, and execute Setup(.exe)
Install/Update as normal. Reboot.
Launch Second Life and be amazed

I found this at the ASUS forums, which again links to http://driverheaven.net/modtool/
It works for me. The FPS may not be the best, but atleast it works right? Better than nothing!