I fixed this yesterday:

gnome-settings-daemon (3.1.91-0ubuntu2) oneiric; urgency=low

  * Fix the volume OSD patch so that the volume level is displayed correctly
    again
    - update debian/patches/16_use_synchronous_notifications.patch
 -- Chris Coulson <[email protected]>   Mon, 05 Sep 2011 17:40:06 
+0100

Please upgrade to the latest gnome-settings-daemon and restart your
session, then it will work again

** Package changed: gnome-control-center (Ubuntu) => gnome-settings-
daemon (Ubuntu)

** Changed in: gnome-settings-daemon (Ubuntu)
       Status: Incomplete => Fix Released

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https://bugs.launchpad.net/bugs/841027

Title:
  notification of volumechange is only off or on

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