I have exactly same problem. By default, in the desktop effects -dialog
(system - settings - appearance) setting "Normal effects" was selected.
When I chose "extra effects", system stopped to response. Anyhow I was
able to move cursor, but eg. ctrl+backspace or ctrl+alt+f1 didn't work.
After hard reboot "extra effects" was selected.

Now if I try to choose "Normal effects" or "No effects", system freezes
(but I can again move cursor). After hard reboot "Extra effects" is
still selected.

System: Gutsy Tribe 3 x86_64
Machine: Thinkpad T60
uname -a: Linux heikki-laptop 2.6.22-9-generic #1 SMP Fri Aug 3 00:20:35 GMT 
2007 x86_64 GNU/Linux
glxinfo: OpenGL renderer string: Mesa DRI Intel(R) 945GM 20061017
There seems to be nothing interesting in xorg.0.log

-- 
[Gutsy tribe 3 x86_64] Enable or disable "desktop effects" make the system do 
not response (santa rosa)
https://bugs.launchpad.net/bugs/129627
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