Hi! I had the same troubles: ATI Graphics, Suse 10.1, Laptop.
The problem seems to be that Domininons uses the MESA libraries, even if the ATI binary driver is installed.
The solution is to bend a link and then Dom2 will be fast. However, this does not work with Dom3 for me
, it just makes Dom2 go real fast only (even in a DualHeaded configuration). More information can be found at the end of this thread:
Post#455756
The problem is probably ATI/SUSE specific, since I recall that a similar problem existed generally for ATI under SUSE9.3, where the links had to be set manually. Furthermore, I do believe that installing updates generally causes troubles with ATI under Suse:
Go to Yast->Software->SoftwareManagement and search for fglrx.
If you have downloaded and installed the lasted driver, you will see a package like
"fglrx_6_9_0_SUSE101". In this case you should alter the links as described at the end of the above linked post.
Alternatively you should see "x11-video-fglrx" and "ati-fglrx-kmp-default". Using those
instead of the above mentioned package should make things work right away, however they use an older binary ATI driver (8.26 instead of 8.29 for me), which may cause troubles elsewhere (TV-Out or DualHead).
Also keep in mind that running YastOnlineUpdate might require you to reinstall the binary driver again. You can add the following YAST software installation source
http://www2.ati.com/suse to obtain the above named packages automatically.
Sent me a PM if you need more advice to get Dom2 running under ATI/SUSE10.1.
AND PLEASE sent me a PM if you are able to get Dom3 running under ATI/SUSE10.1!!!! 
NOTE:
I also run Suse10.1 on an 6 year old Desktop with an old Nvidia GeForce1. Installing the NVIDIA driver is automatic and Dom2 and Dom3 run fast right away, so it seems that ATI should take the blame here, not Illwinter nor SUSE!