I think I found what's wrong, but haven't found a good workaround yet.
The smoking gun is in ~/.xsession-errors:

** (gnome-terminal:6994): WARNING **: Error parsing options: Unknown
option --sm-config-prefix, passed from terminal child

"gnome-terminal --help" reveals gnome-terminal version 2.22.1 (delivered
with hardy) no longer supports --sm-config-prefix or --sm-client-id (as
does gutsy's 2.18.2).

I tried manually stripping those switches from the gnome-terminal
entries in ~/.gnome2/session, and the mention in .xsession-errors does
go away, but the restore gets confused.

-- 
After upgrading to hardy, gnome-terminal windows are not properly restored on 
login
https://bugs.launchpad.net/bugs/221144
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