Heh, I'm still using Omega 4.10 beta driver set and haven't had a single problem with my 9800PRO (XT board with XT bios flashed) . Both KotORs run smoothly @ 1024x768 with 4xAA/8xAF (I prefer anti-aliasing and little prettier textures over resolution). Other games (HL2, Chronicles of Riddick) run smoothly with almost maxed out settings and even Vampire: The Masquarede - Bloodlines runs playably.
I guess what I'm trying to say is, that the newest drivers isn't always the magical solution to problems. I usually update drivers only if they provide concrete _gaming_ performance boost (and remember, you don't play 3D Mark) or the game simply refuses to work with older drivers (haven't had a single game yet).
As for ATi's drivers, I'd take Omega Drivers (http://www.omegadrivers.net) anyday over the stock ATi reference drivers, they just plain and simply suck.