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0f7b58d
(Get the code!)
The exact same issue just happened to me about an hour ago. There was a whole lot of new updates, including a new kernel (2.6.27.3) and new nvida drivers (177 mostly, it seemed). Prior to the update, my card and graphics were working perfectly, but after the update I'm experiencing the exact same symptoms as described by simonjames. My system was an upgrade from 8.04.1 to alpha 5.