I have the same bug on my Toshiba laptop running the 9.04 live CD.

When I adjust the volume knob on the side of the laptop, gnome-settings
goes into some funky state where it continually triggers notify-osd.
Even with only a minor volume adjustment, the volume will run away to
full maximum or full mininum and continue to stay there.  It effectively
locks up the keyboard and the gnome panel, but the mouse still works for
some things.

I originally thought the problem was notify-osd which was running at
100% of CPU, but some investigation with the help of the notify-osd guys
shows the problem is likely gnome-settings.  If I kill gnome-settings
then everything works fine, but without the Ubuntu appearance.  If I do
something to trigger a restart of gnome-settings (like change the
wallpaper), then the Ubuntu appearance comes back and everything works
just fine until I touch the volume knob again.  Then the entire process
repeats.  In my case this is very reproducible and is triggered only by
the volume knob, but not the on-screen volume slider which can be safely
adjusted with the mouse.

My previous work on this issue can be found at bug 367069 which is
probably a duplicate of this one.

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gnome-settings-daemon grabs my keyboard and won't let go
https://bugs.launchpad.net/bugs/335201
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