Comment 9 for bug 1604657

I have tested the proposed packages with success on VM snapshots from both before and after the issue originally occurred.

I believe I've also tracked down the source of the problem to failing to upgrade Compiz from "1:0.9.12.2+16.04.20160526-0ubuntu1" to "1:0.9.12.2+16.04.20160714-0ubuntu1" when Unity was upgraded to "7.4.0+16.04.20160715-0ubuntu1" (both address low graphics settings) even though they were published simultaneously. This is most likely due to phased updates in Software Updater and the fact that the Unity update doesn't appear to list the Compiz one as a dependency. In fact, http://people.canonical.com/~ubuntu-archive/phased-updates.html reports that this Compiz update is currently being withheld by Software Updater due to crashes, while the Unity update is fully rolled out. This possibly explains why I saw the issue on an existing VM but not on a fresh one.

Proposed packages installed:
libunity-core-6.0-9/xenial-proposed 7.4.0+16.04.20160801.2-0ubuntu1
unity/xenial-proposed 7.4.0+16.04.20160801.2-0ubuntu1
unity-schemas/xenial-proposed 7.4.0+16.04.20160801.2-0ubuntu1
unity-services/xenial-proposed 7.4.0+16.04.20160801.2-0ubuntu1

Here are the sequences of updates I applied in testing.

1. Non-working VM -> Upgrade all packages in xenial-updates with apt-get (still non-working) -> The proposed updates (Working)
Comment: The problem originally appeared after a Unity update in Software updater where unity, but not compiz, was upgraded. Desktop appeared after upgrading to proposed, but I had to re-enable several Unity plugins to avoid annoyances. For example, the "Grid", "Place Windows", and "Snapping Windows" plug-ins, which according to CCSM were all enabled before the proposed update, were disabled after it. There may or may not have been other changes, these were just the ones I noticed, and perhaps this behavior is expected.

2. VM prior to broken update -> Upgrade all packages in xenial-updates with apt-get (working) -> Upgrade to proposed updates (Still working)
Comments: Here unity and compiz are simultaneously upgraded to their mid-July versions and the problem I experienced never occurs in the first place. The proposed update doesn't appear to break anything.

3. VM prior to broken update -> Upgrade unity and compiz (and no other packages) to most recent in xenial-updates (working)
Comments: Basically as 2, but strongly suggests that May compiz package is causing the issue with mid-July unity.

4. Non-working VM -> Upgrade just compiz to most recent package in xenial-updates -> Create new user (works)
Comments: Unity seems to work with a new user, but I wasn't able to repair the existing user's account without installing the proposed packages.

Taken together I think that using Unity 7.4.0+16.04.20160715-0ubuntu1 with Compiz 1:0.9.12.2+16.04.20160526-0ubuntu1 is almost certainly the cause of the issue.

No matter the original cause, the proposed 7.4.0+16.04.20160801.2-0ubuntu1 updates restored functionality (with the minor caveats discussed in point 1) to the non-working VM, and didn't break a working one.