On a hunch, I tried booting to the Gutsy daily-live CD of today (Sat Sep 1 
2007).
This did not solve the issue.
However, I then tried repeatedly tapping CTRL-ALT-F1 during boot as to get to a 
console, and then proceeded to stop GDM (sudo /etc/init.d/gdm stop).
Then, I proceeded to remove the compiz-related packages and restarted GDM after 
doing a killall gdm just to be sure.
Surprisedly, I was this time greeted with a working desktop, however I had to 
start metacity myself for some reason.

This bug might possibly be related to Desktop Effects support detection?

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Gnome startup doesn't go through correctly on Gutsy
https://bugs.launchpad.net/bugs/136396
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