I ran into the same trouble just the other day after downloading the Win98 DirectX 8.1 compatible drivers for a customer.
The install process simply would NOT work when using their default install wizard -- the one that gives you the option of a typical or custom install that includes both drivers and Control Panel. I'd get the Severe INF error as you did, then the wizard would continue on by installing the Control Panel, but the drivers were not installed. I am not a Radeon user, so I am not familiar with all the components of the ATI drivers set, namely what the Control Panel includes or doesn't include compared to the driver only.
First, make sure you uninstall your current Radeon drivers in 'Add/Remove Programs', rebooting and changing your display drivers to one of Windows' Standard PCI VGA Graphics Adapters. That may be stating the obvious, sorry. Then, what I ended up doing was uninstalling the Radeon Control Panel in 'Add/Remove Programs' and going to the folders where the download file was extracted. There were two folders extracted with Setup.exe files in them. The one the wizard was using ended in "-efg." I went to the other one. I believe it was named by the driver build number followed by "-driver" instead of "-efg."
In your case the folders might be, "wxp-radeon-6-13-10-6094-efg" and "wxp-radeon-6-13-10-6094-driver".
Anyway, I ran the SETUP.EXE from that alternate folder and the install went flawlessly. The drivers installed as did the multimedia system tray icon (his Radeon LE card had TV out) and Direct3D and OpenGL tabs were also available in the Display Settings. It seemed to be complete, so I don't know what extras the "Control Panel" install would have had. Do you?
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