Thanks for the hint with ~/.xsession-errors
The problem was, it was flooded with messages from evolution and rhythmbox, so 
I rebooted and here's the error message:

(gnome-appearance-properties:8841): GLib-CRITICAL **: g_array_free: assertion 
`array' failed
Attempted to unregister path (path[0] = org path[1] = freedesktop) which isn't 
registered
Attempted to unregister path (path[0] = org path[1] = freedesktop) which isn't 
registered
Attempted to unregister path (path[0] = org path[1] = freedesktop) which isn't 
registered

(gnome-appearance-properties:8841): GLib-CRITICAL **: g_array_free: assertion 
`array' failed
ERROR: Only administrators can use this function.

Full ~/.xsession-errors is attached. It also proves that the issue is only with 
gnome-appearance-properties because prior to the reboot, I set the gconfs key 
/desktop/gnome/applications/window_manager/default to /usr/bin/compiz and it 
worked, I had Compiz on startup.
Only after I used  gnome-appearance-properties to switch it off and back on, 
Compiz wouldn't work.

** Attachment added: ".xsession-errors"
   http://launchpadlibrarian.net/12855600/.xsession-errors

-- 
gnome-appearance-properties won't start Compiz
https://bugs.launchpad.net/bugs/206259
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