I hear ya! This is specific to new Radeon hardware and the current driver sets.
Works perfectly fine with older Radeons and driver sets.
Noticed there are many more older games that lack proper support with new Radeons. It's actually becoming a problem when no emulators exist.
I managed to dig into the matter with ATI aswell, but it seems they are not giving DX5/DX6 compatibility much priority with new hardware. They'd rather use resources for what is new & shiny.
Understandable, but kind of a shame IMO because we see more and more 3D titles becoming "retro nostalgia". People will still want to play them for that very reason.
Maybe someone will pick up on this and write some new DX5/6/7 emulators for retro gaming?