Sounds very much like you need to re-install the ATI Display drivers that may have become corrupted.
Check these :
ATI Support - Where you can download a tool to analyse exactly which driver you need, prior to uninstalling the xureent driver(s), downloading and installing the correct one(s), plus a Problem reporting wizard / analysis tool that can send details to ATI for further advice.
Other resources to check out :
ati 2dvag.dll infinite loop fix
hardwareanalysis.com
