I have the same issue, as discussed here:
http://ubuntu-virginia.ubuntuforums.org/showthread.php?p=6163965#post6163965

Toshiba Satellite U-200, Intrepid 8.10, 2.6.27-7
Running Intel 950GMA graphics
I'm a newbie, so I didn't configure anything
Exactly the same: ran perfectly under 8.04 with i810 driver, now bailing out to 
vesa driver exactly as described above.
using the intel driver leads to a heavily corrupted screen - large black 
squares make desktop unusable.
Willing to post anything that would help.

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Intel 945GM Fails with Intel Driver when Compiz is Enabled
https://bugs.launchpad.net/bugs/297449
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