This bug affects me too.

To make it work anyway, I desactivated the recommanded nvidia driver and
activate the 173 version instead.

After a reboot, I was in 640x480 so in Ubuntu classic session I went to
nvidia settings clicked on save to xorg.conf and just previewed the
change, launch the xorg.conf : gksudo gedit /etc/X11/xorg.conf and copy
and past the content of the changes proposed and saved the file. After a
logout and a new login, it worked.

My graphic card : Nvidia GeForce 7300 GS.

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https://bugs.launchpad.net/bugs/726496

Title:
  Cannot use Unity or Classic desktop with effects after the latest
  nvidia+xorg update

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