Just a couple of wild guesses, as there's some needed info missing:
1. Are you logged in as the local administrator when you're trying to do the upgrade? This would be a good idea if you're not.
2. Do you have (check in add/remove programs) the ability to uninstall the current display driver and/or is there a utility at ATI's site that will do it? This may clean things up a bit.
3. Last resort: go into the registry, identify the proper keys, and change the permissions on them to "Everyone" gets "Full Control".

#2 may clean up any weird issues from partial install on the upgrade. #1 and #3 would deal with permissions issues on files, etc. that could be hanging you up.