Sorry about the delay. In Gutsy, this problem seems to be caused by a
bug in fglrx, and only when compositing is enabled. There are a host of
other rendering glitches that also occur when compositing is enabled.
xfce compositing works "most of the time", but some windows often show
garbage video memory. In Hardy none of these problems occur anymore, so
I would mark this as 'fixed' rather than 'invalid'.

In case you're curious, I've also attached my xorg log.

** Attachment added: "Xorg.0.log"
   http://launchpadlibrarian.net/14383157/Xorg.0.log

** Changed in: xfce4-terminal (Ubuntu)
       Status: Invalid => Fix Released

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xfce4-terminal graphical corruption
https://bugs.launchpad.net/bugs/145658
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