Confirming that the driver from Hardy Proposed fixed the problem.
Shadows are back to the normal black and the incorrect drawing of the
gtk-window-decorator on unfocused windows does not happen anymore.
GeForce 8400M GS
:~$ apt-cache policy nvidia-glx-new
nvidia-glx-new:
Installed: 169.12+2.6.24.12-17.36
Candidate: 169.12+2.6.24.12-17.36
Version table:
*** 169.12+2.6.24.12-17.36 0
500 http://us.archive.ubuntu.com hardy-proposed/restricted Packages
100 /var/lib/dpkg/status
169.12+2.6.24.12-16.34 0
500 http://us.archive.ubuntu.com hardy/restricted Packages
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[nvidia 169.xx] gtk window decorator somtimes draws decoration ugly or not at
all
https://bugs.launchpad.net/bugs/186382
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