I seem to be having the same problem. I reported this as:
bug #138933: [Gusty] Broken Nvidia driver after upgrade to Gusty (7.10)

What might be the problem is a hidden file in /lib/linux-restricted-modules/ 
try running:
sudo rm /lib/linux-restricted-modules/.nvidia*

Also see these bug reports for more information:
Bug #106217: Hidden file does not get removed when switching from 
nvidia-glx-new/nvidia-glx-legacy to nvidia-glx causing X not to start due to 
mismatch of versions
Bug #130799: Gutsy nvidia-glx no gpu or API mismatch

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[nvidia-glx-legacy] nvidia module won't load with 2.6.22-10 kernel (gutsy)
https://bugs.launchpad.net/bugs/137432
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