Success! Helps if you change the ownership and permissions on the kext files! Since my display was messed up, I had to ssh in and do stuff via command line. I did have one issue though. I copied these three files over, put them in the right place, changed perms and owners, and rebooted. The display hung at the apple logo, and in the log I saw:
com.apple.kextd[10]: Can't create kext from cache: /System/Library/Extensions/ATI2400Controller.kext is already open and has a different CFBundleVersion from identifier->path cache entry 4.
I had to clear cache, but did not see the files other mentioned to delete, so I ran:
kextcache -system-prelinked-kernel
kextcache -system-caches
And rebooted...
came up clean, and the older drivers are loaded, and no hangs in 30 minutes... (which is longer than I was getting lately)...
All I can say is thank you thank you thank you! The iMac lives!
$ kextstat | grep ATI
72 2 0xffffff7f81898000 0x45000 0x45000 com.apple.kext.ATISupport (6.0.6) <71 9 8 7 5 4 3 1>
73 0 0xffffff7f81bcb000 0xca000 0xca000 com.apple.kext.ATI2400Controller (6.0.6) <72 71 9 8 5 4 3 1>
75 0 0xffffff7f818dd000 0x261000 0x261000 com.apple.ATIRadeonX2000 (7.1.2) <74 71 9 7 6 5 4 3 1>
91 0 0xffffff7f81c9f000 0x12000 0x12000 com.apple.kext.ATIFramebuffer (6.0.6) <72 71 9 8 7 5 4 3 1>