Hello!
This thread helped me too, because i also experienced the same problem.
After i followed your instructions, death, when i installed an older driver and copied the atioglxx.ddl file into a safe place, the following step didn't worked on my PC. I assume that the install directory is ...Program Files/LucasArts/SWKotOR2. When i copied the atioglxx.dll file there nothing happened after when i launched the Kotor exe.
I have ATI Radeon 9550 128MB graphic card. Currently i have updated my driver to the latest version.
I hope my message is clear due to my bad english but anyway forward thanks.
otha.