2 labinnsw:

>>Installing xserver-xgl solved the problem in my case.

 >>code:
 >>sudo apt-get install xserver-xgl

>Be very careful!!! I did this and now I cannot log in.

I have now the same problem. How can a fix it to log on to Ubuntu?

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[gutsy] Regression - "Desktop effects could not be enabled" on ATI Mobility 
Radeon
https://bugs.launchpad.net/bugs/144077
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