Try this!
I had the same problem. Downloaded new drivers from ATI and although it seamed to install, WIN 7 kept the generic driver.
I used Mobility Moder, just google it. Dowload it and used as described in their site. PVT me if u need a link, cause I am not sure i can post it here. They have easy instructions in the site. Basicly you run their free software like a patch in the unpacked ATI driver and then install the driver. It worked fine for me. I also think, as far as I remember, that they explain why this problem is happening on Win 7.
I hope it does it for you too.