Blue screen of death - on ati catalyst install

[theDarkTheta]

Here is the summary of events which led me to the title-
Yesterday, i got a copy of Digit september issue. I was excited by the fact that there are game engines like cryengine and unreal included, i was really looking forward to work with them. I assumed i would require the latest drivers for it so ...
I tried the amd catalyst driver for 64bit windows 7, while it detected the driver properly, the screen flickered and the blue screen of death appeared saying something like the video driver reset got timed-out.
When i rebooted, it restarted very slowly and the theme changed from aero to classic. When i checked dxdiag there was no driver under video tab. Device manager had an exclamation mark on video driver section.
I uninstalled amd catalyst. Even then the driver wasnt working. So i tried updating from device manager. It downloaded and installed the mobility driver. When i rebooted everything was fine performance wise, device manager showed ati mobility radeon driver. But no catalyst driver and unreal engine setup said 'shader model 3 missing'.
Thats impossible rite?

I wanna fix it without reinstalling entire windows system.
Here are the specs-
Windows 7 64 bit
Ati radeon hd 5650 1gb
Intel hd graphics
4gb ram
Intel i5 processor
HP Pavillion dv6 laptop

 

[coderunknown]

i guess you installed the Catalyst Suite. You may need the Catalyst Mobility Suite. Else try the stock driver and everything should work fine with it.

 

[theDarkTheta]

I tried running mobility suite and i got a message:
ATI Catalyst Mobility cannot be downloaded due to incompatible hardware/software on your computer.
The version of your graphics adapter is not supported.
Please contact your notebook manufacturer for a graphics update.

Since HP provides a set of Recovery disks meant to work at boot-time, I cannot access the stock drivers explicitly in those dvds.

Another curious thing I noticed was that when the notebook adapter is switched off, it automatically activates Intel HD graphics. When i type dxdiag: I get manufacturer for this Intel HD chipset as ATI technologies.
Things appear seriously screwed up.