Solution 1: (thanks to chessplayer for pointing this out)
Enable "Unredirect Fullscreen Window" in Compiz Config Settings Manager.
An easy solution for this is described in the following thread on ubuntuforums.org. This is actually quite easy.
In short, what must be done is
- Install CCSM (Compiz Config Settings Manager)
sudo apt-get install compizconfig-settings-manager
- Check the option "Unredirect Fullscreen Window"
For Ubuntu, this option is found in the "General" section of CCSM until 10.10 (Maverick). In Natty (due to Unity), it has been moved to the "Composite" section.
Disable the composite extension.
Add this to the end of /etc/X11/xorg.conf: (make a new file if xorg.conf doesn't exist)
Option "Composite" "Disable"
Then log in with a gnome classic session (without the composite extension compiz doesn't work).
Also make sure to set Vertical blank sync to Always enabled in XBMC.