I went back and took a closer look.  Indeed my wife had set a custom
background.  I set it to use the theme default and the blur/gradient
problem went away.  However, a new problem showed.  When I made the
change, I got a rectangle that was not painted in the panel - see new
screen-shot - of lower left hand corner of my screen.   Their is an
unpainted area just to the right of the Close All Windows applet.

** Attachment added: "Screenshot.png"
   
https://bugs.launchpad.net/ubuntu/+source/gnome-panel/+bug/654916/+attachment/1730992/+files/Screenshot.png

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Gnome Panel Painting Incorrectly
https://bugs.launchpad.net/bugs/654916
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