Public bug reported:

In Gutsy 7.10 beta, after a fresh install, I experience three problems
with changing the visual effects from None to another option:

1) A dialog box pops up reading "Composite extension not enabled." The
dialog provides no automatic way or instructions to enable the composite
extension. I thought Compiz/Beryl were enabled by default in Gutsy? I
learned by searching the forums how to edit by xorg.conf file to do so,
but I would recommend this be automated, and I don't understand why it
wasn't done by default.

2) Clicking 'OK' in that dialog box does not make it go away. It just
pops up again immediately. To close it permanently, one has to click on
the standard close button in the top right. The 'OK' button should
trigger the dialog to close.

3) After closing the dialog, the Visual Effects radio button I chose
that caused the dialog to appear is selected, even though those Visual
Effects are not enabled. Closing the dialog should keep the Visual
Effects selection where it was originally.

** Affects: ubuntu
     Importance: Undecided
         Status: New

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composite extension not enabled
https://bugs.launchpad.net/bugs/148221
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