adding the xserver-xgl (and its deps) package and restarting X solved
the problem for me. perhaps these should be dependencies if we are going
to enable basis desktop effects by default? or is this solution masking
some other symptom?

Tail of log:
Setting up libglitz1 (0.5.6-1) ...
Setting up libglitz-glx1 (0.5.6-1) ...
Setting up xserver-xgl (1:1.1.99.1~git20080115-0ubuntu1) ...

Happiness ensues.

-- 
No window decorations using compiz fusion after creating new user
https://bugs.launchpad.net/bugs/154596
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