Good news. Lucid Lynx Alpha 3 does not exhibit this behaviour on the Radeon 
Mobility M6 LY
(Neither does Alpha1 or Alpha2).

Compiz works! No corruption. Something must have been fixed between 9.10
and 10.04.

lspci output:
"VGA compatible controller: ATI Technologies Inc Radeon Mobility M6 LY"

-- 
ATI graphics corruption with compiz on XAA
https://bugs.launchpad.net/bugs/429251
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