Radeon 9700s are brilliantly designed with a shim that is significantly higher than the GPU this is filled in with a nice fat heatpad (and in the case of my 9700 pro they had even left the wax paper on the bottom half of the heat pad)- so the design does not promote good heat transfer.
This combined with your generally high temps is probably causing the problem.
You can test this by touching the back of the card behind the GPU I think you will find it is very hot.
I think you have either got to RMA the card as unusable or take your life in your hands (or card) carefully remove the HS take the shim off, clean off the thermal pad and carefully reseat the HS with some suitable thermal goop.

I have done the latter (but my card actually worked properly in the first place and still does))but I think I would advise RMAing it.