I successfuly installed and activated the atahualpa theme
but when I try to access the theme options link under the appearence heading
in the WP dashboard.

I get the following error page

500 - Internal server error.
There is a problem with the resource you are looking for, and it cannot be displayed.

Any help to resolve this greatly appreciated!

Does the default theme work?

yes it works

How did you install the theme? What version of Atahualpa?

I you installed from WordPress.org that version is 3.4.9 (the last I looked) so what I would do is download 3.5.1, install manually, and activate it to see if the problem is fixed. Also after activating make sure you click the "Delete 'bfa_ata4'" button in ATO>Export Import Settings

I have the latest version of wordpress 2.9.2 and I have 3.4.9 atahualpa

Then I would manually upgrade to 3.5.1 as described in my previous post.