Virtual PC emulates S3 video controller chips. It does not emulate nor directly access ATI-based graphics chips.
It will, however, directly support several 3Dfx PCI game accelerator cards.
It's not ATI's fault - this is how Connectix programmed VPC. If VPC directly accessed the ATI chip on the motherboard, it might prevent Mac video from being able to co-exist. I'm not a programmer, but I'm sure Connectix had a reason behind the way they did things. Copyright issues may also have been a factor.