I removed xserver-xgl package (which is what I assume you meant) and at
that seems to fix the problem. Window refresh works fine and glxgears
does not crash and is nice and smooth as expected.  I can also turn on
"Extra Visual Effects" in Appearance Preferences without the screen
going crazy which wasn't working before.

So far this seems to pretty much fix the problem for me.

-- 
glxinfo: 'Direct rendering: no' on 915GM video chipset on Gutsy
https://bugs.launchpad.net/bugs/154104
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