Bartosz,

>Have no personal info re: ATARI. My info came from:
>Atari 800 computer page.

1) I doubt the Atari 800XL/65XE precedessor(sp?) had better gfx than them. And the 128 colors seems to be definitely mistaken.
2) Forget the "bitty boxes", 400/800. These were too poor to allow any decent application. 800XL would be the way to go. (yes, the difference is BIG!)

>Saying this, i wouldn't imagine producing a video solution that wasn't "useful". My personal definition of "useful" would entail full bitmap capability (vs. block pixels) and a level of resolution that allowed a reasonable graphic capability (i.e. 640x200 min).

Because you haven't apparently worked with anything less :) I must say the display of Atari was extremely useful and not once my jaw was dropping when I looked at the magic by experienced programmers and talented graphicians.
Check screenshots of some of the old Atari games:

http://atarigry.w.interia.pl/gryaz.html
Titles worth checking for gfx (yeah, I played great most of them):

Black Lamp
Cavernia
Draconus
Fred
Miecze Valdgira
Misjaja Commando
Red Max
Spy vs Spy 2
Test Drive
World Karate Championships

If we could reach this level I'd be quite happy.
Probably that's impossible with a single '51, but Atari had 2 relatively advanced chips for that work, one that took care of color mappings and one that was creating indexed pixels. Possibly this could be done with 2 '51s?