ClownRazer

Got it! Stumbled on it when editing panelbar display settings and one of the windows had a "desktop compositing is not enabled" message... If you search for Window Manager Tweaks from the PepMenu the last tab is compositing. Hit the top checkbox to turn it on and that seemed to fix things for me. I used the defaults that were "ghost-checked" below but if you want to tweak those for performance/looks then have at it. Adding some keywords here for future users searching the issue: Window smearing dragging...

Did you (or anyone ever find a solution to this?) I have a similar situation using virtualbox and I'd like to move up from Pep10, but this is a pretty big handicap.