i just bought a Dell 1420N with the 128MB 8400M GS card and had the exact same problems. i used the restricted driver option in ubuntu gutsy for the video card. i think that was version 100.14.19. i installed envy and updated the driver to 169.09. i have to say compiz is definitely running a lot smoother. but not smooth enough.
i can now run animations for my windows. but they are still pretty choppy. very noticeable.
the resize info plugin in compiz actually works now.
rotating the cube is still kind of choppy. but better?
there is plenty room for improvement.
i have an AMD64 machine at home with a 256 MB GeForce 7600 GS card in it that can kill this much newer laptop in graphics performance.
i guess i'll just have to wait for the next driver release.