At first I thought it was a cute effect that could be modified, but after playing around with the Compiz settings I realised this was actually a bug!
Some people have found success by installing the Nvidia drivers from their website instead of using the ones packaged with Hardy, however this also does the job nicely:
sudo rm /usr/lib/xorg/modules/libwfb.so sudo ln -s /usr/lib/nvidia/libwfb.so.xserver-xorg-core /usr/lib/xorg/modules/libwfb.so
You are only deleting and recreating a symbolic link, so it’s nothing too drastic that you should be worried about trying. Just log out and back in again after doing it and you should see “normal” shadows which you can go ahead and edit on the “window decoration” section of the Compiz settings.