i am facing the same issue.

i haven't tried the solution posted here but i can use my system with
the older kernel and also in the recovery mode and starting x in safe
mode looks as good as normal

i was thinking maybe it was a driver issue as  i am also not able to
play video files in full screen, all of them get stuck... but they play
fine if played in the defualt window size, could this also be related to
the changes in the new kernel or should i file a new bug report.

also in have not been able to turn on desktop effects since i moved to
lucid beta.

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[i855] X doesn't start with kernel 2.6.32-21 unless passing i915.modeset=1
https://bugs.launchpad.net/bugs/566379
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