I've got the same problem. I had an original G4 500 Dual Processor Mac with the Rage 128 Pro card in it and Falcon worked fine. Then, I bought one of the Radeon BTO cards through Apple and as soon as I loaded the software and installed it, poof, no more Falcon. I get the same type 2 error. I have it updated to version 1.06c (the most recent) so I too, like you, believe it is a Radeon specific problem. I guess all we can do is contact both WizardWorks (Falcon) and ATI (Radeon), and see if they are aware of the problem. Here is my email address if you want to contact me.
gchoike@yonsei.ac.kr