Re: ITT I learn about debugging a video driver
I had a similar situation though I have a NVIDIA card with proprietary driver from rpmfusion. After upgrade, I was initially greeted with dependency problem and I had to boot to recovery mode to fix the system as well. The thing is I also have a number of packages installed from rpmfusion on my F15 system before I upgraded it to F16, which I think is the main cause of the upgrade problem. Was your F15 also installed with free and nonfree packages from rpmfusion? If the answer is yes then read on.
The upgrade process just upgrades the software packages belong to FedoraProject repositories. The Anaconda does not upgrade packages from rpmfusion repositories. Thus, the upgraded system may end up in broken state. For instance, the installed graphic card proprietary driver (from rpmfusion) is not upgraded and it causes problem as it does not match with the newly upgraded kernel.
I fix my system in the recovery mode (already running the new kernel from F16) by performing another "yum update" in the text console/terminal. This step upgrades the installed rpmfusion packages so that they are compatible with F16, including those proprietary drivers/kernel modules. So, if this is indeed your problem then I think this step should solve your ATI driver problem as well.
I actually oversimplify a little bit here. Your mileage may vary. As in for my case, I had to perform the "yum update" a few times. First with "--skip-broken" and interpret the yum's output along the way, until I got most of the dependency problem resolved. In the end I even had to remove a few unresolved packages (fawkes, fawkes-devel, fawkes-doc, fawkes-plugin-player, and pida; which BTW is a fault of FedoraProject).
YaoWT - Leave no window unbroken ^_^