You need to disable compositing due to this bug:
http://bugzilla.xfce.org/show_bug.cgi?id=2792
Adding the following to your xorg.conf should do the trick:
Section "Extensions"
# Workaround for slow xfce-terminal redraw times
Option "Composite" "Disable"
EndSection
** Bug watch added: Xfce Bugzilla #2792
http://bugzilla.xfce.org/show_bug.cgi?id=2792
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xfce4-terminal slow after jaunty upgrade
https://bugs.launchpad.net/bugs/367455
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