I solved this problem by first recreating the xorg.conf using nvidia
xconfig tool:

sudo nvidia-xconfig

and then executing nvidia-settings as root (or setting write permissions
to xorg.conf and possibly the /etc/X11 directory itself to your user,
perhaps using posix acl)

-- 
Failed to parse existing X config file '/etc/X11/xorg.conf'!
https://bugs.launchpad.net/bugs/469729
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