This behavior occurs intermittently on my machine as well.

Xubuntu 8.10 (kernel 2.6.27-7-generic)
video is ATi Radeon Xpress 200M (fglrx installed and enabled
xfwm4 compositing enabled.

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Switch user resuilts in "Cannot start new display" error
https://bugs.launchpad.net/bugs/280216
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