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I don't rate the Ubuntu live CD against the Knoppix one to be honest - Knoppix is uber-speedy in comparison and the DVD version contains tons of software.
Your Radeon will always work - it'll handle 2d absolutely fine. There are a multitude of drivers all handled 'out of the box' in Linux (you generally don't have to go driver-cd-hunting in Linux)
There's even reverse-engineered 3d-acceleration available, it'll just never be as good as the proprietary drivers from ATI and it's the proprietory drivers that make it fall down.
If you could tell me the exact error message it should be an easy fix, as there are several 'guaranteed' drivers that would work.
Oh, and your mouse will work just fine - I've always used Microsoft mice.
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