Looks like this particular problem came back in jaunty. A fix is in bzr
** Changed in: compiz (Ubuntu)
Status: Fix Released => Fix Committed
Target: ubuntu-7.10-beta => ubuntu-9.04-beta
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Compiz-fusion fails to start on ubuntu-studio because of XDG_CONFIG_DIR -
/usr/bin/compiz: 376: /usr/local/bin/compiz: not found
https://bugs.launchpad.net/bugs/141621
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