This has been fixed.
compiz (1:0.8.2-0ubuntu16) karmic; urgency=low
[ Travis Watkins ]
* debian/patches/015_draw_dock_shadows_on_desktop.patch:
- change decoration plugin to draw dock shadows only on the desktop window
instead of on top of all other windows
--
Compiz's Panel shadows show on top of other windows
https://bugs.launchpad.net/bugs/91786
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