Right I've got to the bottom of this.
For some reason someone added a broken set of Intel drivers to Xorg a few versions ago, and rather than just replacing them have been patching them repeatedly.
There's only a couple of solutions I can offer for this.
1. Ditch Xorg and use Xfree86, the downside being the amount of junk that comes along with it, and it'll break all your video setup apps etc - as well as compiz etc.
2. Change distro to one that has a working Intel driver. That'll involve some major google searching and you could end up with a badly out of date distro.
3. Try a different Intel kernel driver, there's a few listed on the Ubuntu forums, but none are official and they occasionally get removed during system updates leaving you with a non-working Xserver.
Sorry I can't offer a simple solution.