Full session (rather then nested) Xgl now is working for me with the
free ati driver, using the following script from GDM ...

#!/bin/bash
# Start up Xgl, compiz, and GNOME
# Run Xgl server on :1, on top of normal X
Xgl :1 -fullscreen -ac -accel xv -accel glx:pbuffer &
# Tell subsequent X programs to access the Xgl server at :1
DISPLAY=:1
# Start Compiz window manager
gnome-window-decorator &
compiz gconf decoration wobbly fade minimize cube rotate zoom scale move resize 
place menu switcher &
# Start GNOME
exec gnome-session

:-)

-- 
nested Xgl crash, ATI r300
https://launchpad.net/bugs/39759

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