my experience with LFS and ATI and Nvidia..
using a Nvidia 6800GS @ Ultra gave me gatter graphics and better sharp looking edges and no Moiré, when conpared to may actual X1950XT... i dont know why... i trying all setting in the ATI and it just wont look sharp and depth as the nvidia...
the problem you are having with AA happens if you are trying to run the game in a resolution @ Hz diferent from the manufacturer recomended.
in my case....i can change all imaginable settings on the game and vga control panel and no matter what i do it wont go with AA UNLESS i use the manufacturer recommended settings for the resolution im playing.
example: 1280 x 1024 @ 75Hz on my Benq 19'LCD will not do AA no matter what i do.
if i simply change it to 1280 x 1024 @ 60Hz AA kicks in and works perfectly.
thy lowering your monitors Hz on the game setup, save, close and restart the game.