Acer :: Ferrari 3400 Video Card (ATI Radeon 9700 Mobility)

here are the specs of my Acer Ferrari 3400:

Acer Ferrari 3400
ATI radeon 9700 mobility
2 gigs of ram
Dual boot with Win XP pro and Ubuntu 7.04 feisty fawn
Newest BIOS and software updates from Acer homepage

Few days ago I started having a problem with my Acer Ferrari 3400 laptop. It all started one morning when i tried to boot my computer.

I booted with ubuntu 7.04 feisty fawn and right after the operating system loaded the X graphical interface, the screen went black and the computer freezed.

I rebooted and tried again with Windows XP (I use a dual boot with Win XP and Ubuntu), and this time I got as far as the Windows loading screen. Then the loading screen turned black and the computer just rebooted itself.

I turned off the windows "auto-rebooting in case of error"-option and tried to boot with Win XP again.

This time I got a "blue screen of death (BSOD)" right after the Win XP loading screen. The BSOD indicated a problem with ati2dvag.dll and said that the "device driver got stuck in an infinite loop". Also the technical information said:
** STOP: 0x000000EA (0x8A56C218, 0x8A5BDAD8, 0xBACDFCB4, 0x00000001).

The numbers in parenthesis are always bit different each time i try to boot.

I googled the error and it seems this kind of a error message is very generic and could be the result of nearly anything ranging from software problems to hardware malfunction.

So this is what I have tried to do so far:
- I booted Win XP with VGA mode -> Windows booted normally, but as I try to increase resolution the same BSOD appears and I have to reboot.

-I uninstalled all ATI video drivers from Win XP and windows booted normally. Of course, without video drivers, the performance of Windows was very sloppy. But it worked with higher resolutions.

- I installed the newest Omega Drivers for the vid card. Windows booted normally, but still had sloppy performance. I tried dxdiag and it showed that DirectDraw&Direct3D acceleration are unavailable. It also showed that video card memory was n/a. Win XP worked with high resolutions.

- I tried to boot Ubuntu linux with a generic vesa driver and it booted normally. Changed back to radeon drivers and it didn't work.

- I ran the Memtest 21 times and got no memory based errors

- I cleaned Win XP radeon drivers with DriverCleaner and tried a fresh install of radeon drivers. Didn't work.

- Finally, I did a Win XP recovery (reinstall) with the CD:s that came with the computer. The result: same error as before and now I can't even enter the VGA mode because the windows tries to raise the resolution right before entering the desktop -> BSOD