I have the same TV, but 9600GT Sonic, with native HDMI out. I had to disable on-board video and install drivers from Palit for sound card on video board. It worked fine and I could hear a glorious stereo sound

from my TV or get a 5.1 sound from optical out - on-board of my Video card.
It was fun, so I have installed latest NVidia drivers and got rid of sound driver on video card. Back to spdif from mobo to my amp.
Try to install drivers which came with your ATI.