I had exactly the same problem like in your screenshot after updating
von "nv" to "nvidia" driver.

Finally, running the command
nvidia-settings -a InitialPixmapPlacement=0
after starting X helped for my GeForce4 Ti 4200.
Trying max. value 4 made it worse!

You can query you actual setting with 
nvidia-settings -q InitialPixmapPlacement

Does anyone have an idea how to add it to xorg.conf? Did get in running
and now I put it in the Gnome sessions starting programs.

-- 
font rendering Intrepid still broken on old nvidia cards 
https://bugs.launchpad.net/bugs/304822
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