According to hoborg (SAF thread already pointed to) that's the best version driver for XP, have you got all windows updates including directx, maybe try installing .net3.0\3.5 and trying video renderer as EVR, you need to go into MP config expert mode to see this, under the directshow filter control.
Maybe someone else with a ATI card can give you some advice, as I know there are a few tweaks around to get this working better with MP.
Also if using haali make sure autoload VS is disabled, see if that makes a difference.