OK, for me this fix worked:

You need to check the file /etc/default/linux-restricted-modules-common
(with the text editor of your choice, opened with a sudo -- sudo gedit
/etc/default/linux-restricted-modules-common)  and make sure the line

DISABLED_MODULES="nv" is NOT there.

If it is. you need to change it to DISABLED_MODULES="".

If you reboot, everythin should be ok. (It was for me)

This is a artifact from edgy if you installed the nvidia proprietary
drivers "manually" (i.e. either used the NVIDIA file that compiles the
driver and set settings by hand, or used the "Envy" script).  It seems
in Feisty that the copying of the drivers from /lib/restricted-
modules/'uname -r' to the volatile folder (where xorg looks for the
driver files)  by the /sbin/lrm-manager script is prevented if the "nv"
is set.  (The nvidia_new driver is being copied due to bug #105756).  In
edgy, however, it was necessary to have this set when you installed the
nvidia drivers manually.  SInce these actions were done outside of the
repositories, it would not be up to the dev's to account for this.  I
wonder if this is not one cause of a lot of problems that seem to be
happening with nvidia and upgrades from Edgy to Feisty not working who
installed the NVIDIA drivers for Compiz/Beryl in Edgy.

Hope this solves your problem,  searayman.

-- 
nvidia drivers wont work after upgrade to feisty
https://bugs.launchpad.net/bugs/106906
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