If you have a snow leopard install disk, use it to perform an upgrade to the computer. From what it looks like, you have a faulty system file. It may however be the hardware as Richard said where the Air just isn't working.

I have however used PCs running as Hackintosh that have been able to run Catalyst just fine so I'm not sure except to try to run an upgrade.

If you don't have snow leopard, you can always do an archive and install with your leopard install disk. Either method will leave your files intact but fix the broken system files.