desktop background has wrong size when zoomed with laptop and external monitor attached

Oh, and I forgot to mention this bug also appears in the GDM login screen, i.e. 'two' backgrounds on top of each other, each with different resolution.

seems to be fixed in 10.10

Well, maybe it's not fixed.
It seems to be a problem related to my nVidia graphics card.

I used the nvidia-settings application to setup the dual view option. When I first had the attached monitor unconfigured - the GDM login screen was only on the laptop display, then I logged in, attached the monitor, ran nvidia-settings, setup twin view, and it worked fine.

But once I ran `gksu nvidia-settings` aWhen I dind saved the twin view settings to my X configuration file, after logging out the GDM login screen showed the bug and the bug also appeared after logging in.

I meant 1680x1050 resolution instead of 1680x960 but that doesn't matter much.

Anyway, I changed my nvidia-settings generated xorg.conf a bit (attaching).
The idea is that instead of having the "metamodes" option to be: DFP resolution set to 1280x800 and CRT resolution set to 1680x1050, I set them both to 1680x1050.

I guess that what happens now is that the DFP resolution for the laptop screen is invalid and thus the laptop screen is blackened, but the attached monitor shows the picture at the specified 1680x1050 resolution. But one I disconnect the monitor and restart the X server (by logging out) it defaults back to the 1280x800 resolution and shows a picture on the laptop monitor.

In all of the above situations the background appears just fine with the 'zoom' option.

Thank you for taking the time to report this bug and helping to make Ubuntu better. Please attach your log file (/var/log/Xorg.0.log) to the bug report.

This is the Xorg log after tweaking my xorg.conf (setting both CRT and DFP to the same resolution).
Do you wish to see the Xorg log after restoring the original xorg.conf file as the bug appears again?

I think that what you are seeing is your laptop screen being overlaid on your external monitor. Go to System, Preferences, Monitor.

I have laptop w. docking station and external monitor and the following worked for me.
Drag and drop laptop screen so it does not overlap monitor

Go to System, Preferences. Power management, on AC Power,
 Put Computer to sleep when incactive for: Never
 When laptop lid closed Blank screen.

I opened system >> preferences >> monitor, which showed a little note that it will open the nvidia-settings instead of the regular gnome monitor dialog. I then followed your idea but a bit differently as it did not work first. I marked the laptop screen as the primary monitor and now the backgrounds do not overlap. I saved the changes to xorg.conf.

However, when I logged out and the login screen appeared, the little box where you enter your password was not centered on the big monitor but instead centered at the top-left region of the screen, as if it was centered around 1280x800 resolution and not the 1650x960 resolution.

I fixed this again after editing the xorg.conf file and settings the DFP resolution to 1650x960 and now the backgrounds do not overlap, the login screen's box is centered, and when the external monitor is not attached the laptop monitor is working correctly.