Okay, that bug report helped me to fix my issue. Here's what I did, using Synaptic, so no command line needed.

Firstly, I checked what kernel I was using - this can be done through the command line, but I just made a note from the boot menu. My kernel is 2.6.27-7-generic.

After booting I opened Synaptic and searched on "headers" (searching on 2.6.27-7 may also work). This showed me that the 2.6.27-7-generic headers were not installed (the 2.6.27-7 headers were, but not the "generic" ones). I installed the generic headers, and nvidia-kernel-common which also wasn't installed. This latter may not be needed, but I went with it as it looked important

After that, I found that going to Hardware Drivers and enabling 177 now worked (reboot required), and hey presto, I now have a working system again.

Hope this helps.