Tried most of what was previously suggested. My solution was to edit the "C:\\windows\\system32" folder and rename the ati*.* files. Added the ".old" extension on to the seven "ati*.* exe, dll, ax files.(Do not delete these just in case you need to rename them back). Rebooted, then was able to install the SapphireTech Radeon HD3650 512MB DDR PCI-2 driver suite with CCC without errors. To be safe thought my specific manufacturer's driver download would be better than the ATI 3650 driver.
After the CCC reinstall as proof some of the renamed .old files were not recreated in the "C:\\windows\\system32" folder and some differently named ati*.* files showed up.
Have dual displays so was a bit more complicated but saved me from the whole reformat thing as I had just ignored the driver update error on booting for a few weeks. Lesson was I should have done a system restore immediately after rebooting when the ATI update initially generated an error. Then I was prompted for the old version uninstall message, which of course would not uninstall without errors. Downloaded the old Jan 2008 CCC driver suite, installed and unistalled, moved a bit further along but still got some MOM errors on booting. Finally did the file rename solution to get past the errors and then had to reinstall my viewsonic monitor drivers to get windows XP Pro to recognize both monitors. Then used the basic CCC setup to configure the dual monitor displays.
Hope this saves someone some grief.