Just updated to latest packages.
lsb_release -rd
Description:    Ubuntu karmic (development branch)
Release:        9.10

New Kernel.
uname -r
2.6.31-12-generic

Problem seem fixed. Xorg cpu usage much lower.
Xorg still jumps to 1-10% CPU and firefox 5-15%

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MASTER:  xorg high cpu usage, general system sluggishness
https://bugs.launchpad.net/bugs/294972
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