Will somebody explain to me what have just happened?
I have to give the credit to @Mat.
Just now, I have freshly installed 9.2.2 with drag install method. What the heck, I have plenty of time, might as well play with install and see what will happen, might discover something new. Booted first to extensions off, removed all ATI extensions and install drivers from 2005, updated it and rebooted. You know what, it booted up to desktop at 1360x768, my monitor's full resolution and froze. But of course, I know what is causing it, QuickDraw 3D Rave. Booted again to extensions off, made a copy of the settings thru extensions manager and turned off QuickDraw 3D Rave. Rebooted normally, and there I have a full functioning desktop at full resolution.
Thanks to all the good people here who have helped me one way or another thru comments and suggestions to make it happen. I owe you all a pint. Cheers
@MacOS Plus, I cannot open the ATI Displays windows for some reason. I think ATI Graphics Acceleration should be enabled to do this. Mine is greyed out.