I am using Ubuntu Jaunty 9.04 and noticing this problem.

So far, the easiest fix I found was to run metacity --replace on the server 
machine.
This kills the compiz window manager and replaces it with metacity which 
enables vnc clients to run fine.

I am able to notice the changes at runtime, so changing window manager
updates the clients as soons as the command is run.

I hope this helps anyone with this problem.

-- 
Compiz / vnc screen refresh with nvidia-restricted driver/VirtualBox/ATI fglrx 
driver
https://bugs.launchpad.net/bugs/353126
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