I have an ATI 9200se 128M AGP running with Callisto drivers (working perfectly.) However I've just bought a new monitor and can't get the extended desktop working.
Whichever monitor is plugged in to the DVI slot will have the correct resolution but the other (plugged in to VGA) will have that same resolution and mirrors. System preferences only lists the one monitor (DVI.) Any assistance would be greatly appreciated.

I don't know if this would help. But I am also running on dual monitor setup on a 7600GT AGP card. The only way for OS X to recongise both monitor as individual monitors is to use a DVI-VGA adaptor on the DVI output making both monitor running on VGA.

Don't worry about the quality issue, if you get a good quality VGA cable, you won't miss much if at all.