I am currently using the latest 256.35 driver on a 2.6.35 rc3 kernel with no problems at all, brightness works just fine for me. As does powermizer and all other functions.
It also worked just fine for me on kernels 2.6.31 and 33.
This is with a Toshiba laptop with the 330 nvidia card.
So I can assure you it does work.
Follow the instructions the developers have posted so you can get some help with your problem.