Ubuntu – Compiz gone with Ubuntu 10.10 upgrade on VirtualBox Win7-64 host

I just upgraded my Linux guest running on Win7-64 VirtualBox 3.2.10 from Ubuntu 10.04 to 10.10. I followed the usual steps to reapply guest additions, including installing build-essential and linux-headers-… before running the guest additions installer. No errors or warnings occurred in the installer, which output messages indicating that it was using all the X11 stuff, and I restarted the guest. I also checked that 3D acceleration is on.

Despite everything seeming to go quite smoothly, I am no longer able to turn on Extra effects in System|Preferences|Appearance|Visual Effects. It was working a treat with 10.04. When I click the button, it spends about 15 seconds searching for available drivers, flickers everything, grays out the dialog box for another five seconds or so, then finally pops up a dialog box that says, "Desktop effects could not be enabled". The same thing happens when I click "Normal" or "Custom" (except that the driver search only happens the first time I click any of these options).

UPDATE: I get the same output, and the same outcome, if I run the installation script as root.

Why can't I turn on Extra Visual Effects after upgrading to Ubuntu 10.10?

Random machine specs:

marcelo@ubuntu:~$ uname -a
Linux ubuntu 2.6.35-22-server #35-Ubuntu SMP Sat Oct 16 22:02:33 UTC 2010 x86_64 GNU/Linux
marcelo@ubuntu:~$ lsb_release -a
No LSB modules are available.
Distributor ID: Ubuntu
Description: Ubuntu 10.10
Release: 10.10
Codename: maverick
marcelo@ubuntu:~$ ls /media/
VBOXADDITIONS_3.2.10_66523
marcelo@ubuntu:~$ 

Here's a re-run of the guest additions install:

Verifying archive integrity... All good.
Uncompressing VirtualBox 3.2.10 Guest Additions for Linux........
VirtualBox Guest Additions installer
Removing installed version 3.2.10 of VirtualBox Guest Additions...
Uninstalling old VirtualBox DKMS kernel modules ...done.
Building the VirtualBox Guest Additions kernel modules
Building the main Guest Additions module ...done.
Building the shared folder support module ...done.
Doing non-kernel setup of the Guest Additions ...done.
You should restart your guest to make sure the new modules are actually used

Installing the Window System drivers
Installing X.Org Server 1.9 modules ...done.
Setting up the Window System to use the Guest Additions ...done.
You may need to restart the hal service and the Window System (or just restart
the guest system) to enable the Guest Additions.

Installing graphics libraries and desktop services components ...done.
Press Return to close this window...