Like my two compadres above, I'm encountering the same symptoms.
Upgraded from Karmic, doesn't work, but does work for a brand new user.
I've looked into my xsessions-error but fixed all the errors, to no
avail. I'm currently working around the problem by launching
"/usr/bin/compiz" at startup, which apparently forces the loading of the
video drivers.

It is the loading of the video drivers that's problematic, I think. When
changing the visual effects settings from "None" to anything else in
Simple CompizConfig Settings Manager, it forces the reloading of the
drivers, and then, things work.

Still, I know I may be a bit harsh, but this definitely-not-minor bug
has been around since day 1, and is still not fixed... It's a bit
frightening for a LTS version. With that problem and all-around
(relative) instability, I find it difficult to defend Ubuntu when
talking about OS merits with Windows- or Mac-users.

-- 
[regression-release] Compiz fails to decorate windows after upgrade
https://bugs.launchpad.net/bugs/572617
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