The message seems fine, but why the value of windowmanager isn't
changing I don't know. Maybe you could try to manually set it to
metacity with Gconf editor, reboot and see if that works, check to see
if Visual effects says "None" and from there try again to change to
normal or extra and reboot and see if Compiz starts. If not, maybe
reinstalling the Compiz-packages could work.

Also you could check the Hardware drivers just to be sure that the
upgrade went fine and the new driver got installed.

-- 
Lucid has no title bars - Metacity issue
https://bugs.launchpad.net/bugs/560082
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