The issue here is not at all about what matters perceptually for playing Quake.
The issue is that Quake is commonly used to benchmark a 3D card's performance, and this benchmarking is often done at different quality settings to see how each card's performance scales as quality settings change.
By forcing a reduced texture quality in the driver, results of this kind of benchmark become meaningless. The cards are performing different tasks, and thus their performance is not comparable.
However, ATI did not advertise this fact (for obvious reasons) and thus any benchmarks that compare Radeon 8500 performance to another card at Quake 3's high settings are not indicative of the relative performance.
Alex Mohr