OK, progress of sorts.

If I log in using Ubuntu Classic (no effects), then plugging in the
external monitors WORKS!  I get an extended workspace.

However, previoiusly I used to use the Dell key (Fn-F8) to switch modes
such that I had the external monitor only and the laptop display would
be turned off.  If I try that now, the external monitor displays a
"signal out of range" error, and if I press the key a couple more times
to get back to the laptop, the display comes back but scrolls
horizontally at a pace too fast to see what's on the screen.

So there's some difference in the Ubuntu Classic options that is causing
the main corruption problem.  Perhaps this bug needs to be assigned to a
different package other than the kernel.

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https://bugs.launchpad.net/bugs/850763

Title:
  [Intel 945GM/GMS] Plugging in external display results in garbled
  screen

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