I just installed Ubuntu 8.10 RC and had the same problem described
above. After completely removing xorg.conf and running nvidia-settings
as root, I was finally able to save a new xorg.conf.

However, there is a new problem: I wanted to setup my notebook to use an
external monitor as a separate X screen. After restarting the X-Server
with the freshly created new xorg.conf, I get an error, and Ubuntu can
only start in "low graphics mode". This is indeed very annoying, as the
second monitor always used to work fine with previous versions of
Ubuntu... I would appreciate it if this could be fixed...

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nvidia-settings crashes when user clicks Save To X Configuration File
https://bugs.launchpad.net/bugs/286424
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