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Hi, Richdave, did you ever try to launch iMovie? I have a PowerColor HD4850 too. I followed your procedure and got working screen res. as yours. Except one thing, when I launched iMovie, I got an error that indicated my card lacked QE support. What a pity....
Did you ever try to connect the Monitor via D-sub, instead of DVI? As I remember, I had the same problem a couple of weeks ago. Because I had experience on D-Sub, DVI, HDMI problem in my other Hacintosh, I tried to connect the Monitor through D-sub to let OSX "recognize and remember" my Monitor. Then I re-connected the Monitor using DVI and everything became OK. Hope this will help!