Installing Catalyst drivers will result in 16-bit colors with heavy "banding".
Tried 10.3 and 10.4 (mobility) with same result 🙁
After some research (google) it seems many others are having the same issue. Perhaps the (iMac) HD4850 is custom made for Apple and require special drivers?
My config: Late 2009 iMac 27", i7, 4gig ram.