I am also seeing this on Ubuntu 8.10 64-bit, fully updated - I am also
using the proprietary nvidia driver with an nvidia 7600GS with compiz
enabled.

I think this is a bug in the proprietary nvidia driver as the recent
180.06 BETA driver claims to fix this problem:

from: http://www.nvnews.net/vbulletin/showthread.php?t=123072
"Fixed a regression that could result in window decoration corruption when 
running Compiz using Geforce 6 and 7 series GPUs."

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Window border is drawed corrupted
https://bugs.launchpad.net/bugs/287179
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