The particular problem mentioned in the bug report does not occur in
Lucid Lynx Alpha 2.

However, there is a slightly different problem: When panning is enabled,
dragging windows by the title bar does not work correctly. There is a
noticeable time delay in the movement of the window, i.e. the window
does not drag smoothly.

Changing visual effects to None, Normal or Extra does not fix the
problem.

Just like in Karmic Koala, the problem is fixed by disabling kernel mode
setting using the kernel switch "nomodeset".

-- 
[i965] Kernel mode setting breaks panning on Intel Mobile GM965/GL960
https://bugs.launchpad.net/bugs/505545
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