I'm running 12.04 which is an LTS and it's pretty much unusable in many ways. Just load up XBMC and you'll get a nice slideshow.
I've been hearing "fixes are coming in the next version" for six months now and I haven't seen much improvement yet TBH.
It's kind of embarrassing because Linux was supposed to be the lean and efficient version of an OS. Well I guess that was true under GNOME2 but I don't know what the hell is going on these days; it's a huge mess and I wouldn't advise any newcomers to dip their toes into this pool.
One of the biggest issues is XSync for nvidia.
It will give an example increase of 30FPS to 50FPS.
Bug report: https://bugs.launchpad.net/compiz/+bug/1049214
If Xrender extension was improved to support vsync, we would not need opengl compositors that need substantial gpu power to work right.
I'm using Xubuntu 12.10 and xfwm4 is very light and good looking, problem is the tearing because the lack of vsync in all xrender compositors.
They could certainly roll their own distro but they really wouldn't need to since X is rather versatile. They could of course just have their own desktop login session (like XBMC) and then the user could just do a switch session. Or better yet just launch Steam on a separate X server.
X is outdated, there's nothing Valve can do about it.