Sounds like drivers to me.
There is a driver element which tells the card to use a particular state as defined in the BIOS, but I have been editing ATI/AMD graphics card BIOSes for over a decade now. The fan controls, voltages and clockspeeds for each state are
determined by the BIOS. The drivers can give more information to the card about what state to be in (2D desktop, 2D video, 3D windowed, 3D fullscreen) but ultimately the fan speeds are based on state in the BIOS and these states are hardcoded by the manufacturer, per card. It's necessary since two almost identical boards from the same vendor can have different coolers. One requiring a 2000RPM blower and another requiring two 1000RPM 92mm open fans.
The drivers are generic and apply to thousands, if not tens of thousands of variants of Radeon from multiple manufacturers across several generations. The fan speeds for one model are likely (if not definitely) wrong for a different model. I think you're misunderstanding your response from Diamond Multimedia which is saying that your BIOS/Card is faulty and that a particular state including clocks, fanspeeds and voltages is not responding to a driver state correctly. That's still a hardware fault and your workaround is fine because it's avoiding this state in which your card is not functioning correctly.