Upgrading to the Nvidia driver 180.06 direct from Nvidia's web site
fixed this problem for me. I can now logout and switch users without
problem.

P.s. Tried it with and without desktop effects enabled and it seems to
work in all cases.

See also bug https://bugs.launchpad.net/ubuntu/+source/nvidia-graphics-
drivers-177/+bug/258357

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fast-user-switch-applet does only start new VT after second try
https://bugs.launchpad.net/bugs/288066
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