I've had this problem also. I was installing on a Toshiba Satellite L455D.
The error on first startup is: "Error 1904.Module C:\Program Files\Common Files\ATI\Technologies\Multimedia\atimpenc.dll failed to register. HRESULT -2147220473."
I click OK and get the same message as above except with "atixcode.dll"
I click OK and it proceeds to finish starting Windows but pops up the warning: "The ATI Control Panel failed to initialize because no ATI driver is installed, or the ATI driver is not working properly. The ATI Control Panel will now exit." I have tried with both the old and new style ATI control panels.
Looking under Display Properties > Advanced > Adapter, all the information is listed as <unavailable>. Under the Device Manager I see a Display Adapter flagged with the yellow exclamation point thing - "ATI RADEON 3100 Graphics".
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Had similar problem with Macbook Pro a1212 (aka MacbookPro2,1). Although Display Properties > Advanced > Adapter shows the information. "Ati Mobility Radeon X1600", and the Display Adapter does not have the yellow flag.
I got the same error messages about atimpenc.dll and atixcode.dll. I may have gotten the additional error message, but I can't remember. I too do not have Netfx 2.0 installed. I also noticed that for a Dell laptop, I could not install the touchpad driver without Netfx 2.0, and it did not give me any error that indicated what it needed. I think I may put back Netfx 2.0 into my slimmed down XP ISO, as it has become a bit of a requirement? Anyone else have these experiences?