I\'m using emacs23 on Ubuntu 32-bit 10.04/10.10 with GNOME and Compiz.
Pressing M-RET in an org-mode plain list in Emacs (GUI) ins
The menubar of terminal emulator is not letting the M key that is meant for Emacs be passed down to Emacs. For Emacs to receive the M key as it is supposed to, you could either use the Esc or disable the menubar and use M key in Emacs as usual.
ADDED:
For the xterm, if you do CTRL+Mouse Button 1, you will see "Meta sends Escape". You need to make sure that option is checked/enabled to make M work as it should in Emacs.