Maybe this isn't the right place to put this but hopefully someone has some experience with it...

I'm playing through Icewind Dale 2 again and I'm in the Ice Temple and the lag I've been getting from spell effects has become unbearable because of the number of casters. I searched on the forum and saw that people fixed this by installing older drivers, but every time I've tried to install an older driver on my video card I get an error message (it seems to be a different error message for each driver I download). Usually it says something about having the correct hardware.

My video card is a Radeon X1300 series 256 mb so its relatively recent. Can older drivers even work on video cards created after the drivers work?

The slowdown is mostly fixed if I turn off transparent spell effects but then the game doesn't look nearly as good and then I have the problem that the entire battlefield is obscured by spell effects and I can't actually see any of the characters or enemies half the time.

If the problem is all about the game slowing down, I would suggest you have a look at the "Slow game" thread(it's the first, pinned thread in the IWD2 columm here).
About drivers, I can not say anything...mine is X1600 but I am always using the Omega Driver for my laptop, and as I recall, this doesn't fix the slow down in IWD2 because that's caused by Direct3D or something.
Just turn the DirectDraw off to see if the game runs smoothly!

Hmmm, I somehow missed the second page of that stickied thread, I'll try turning off DirectDraw. Thanks