I was able to fix this by downgrading to xserver-xorg from testing, and by forcing the install of xserver-xorg-core_2%3a1.3.0.0.dfsg-12_i386.deb .
This is a serious bug, in that many X application will not work correctly, such as Firefox menus, drop down lists in web-pages are unusable, and the inability to close tabs. Also, Gnome or KDE menu's will not work, unless one holds down the left-mouse button. Thanks
