This is the default behavior in 4.10... I think it was done to allow for faster menu drawing. 

If you would like us to change this default, please discuss on the xfce list: 
http://lists.fedoraproject.org/mailman/listinfo/xfce

I already raised the topic on the list.

I think we should use buttons by default, because the panel menu plugin has "Show icons" enabled but still no menus are shown unless enabled in xfce4-appearance-settings. This is confusing.

I'll prepare a patch.

There is something fishy here. We should definitely have buttons by default as /etc/xdg/xfce4/xfconf/xfce-perchannel-xml/xsettings.xml contains
    <property name="MenuImages" type="bool" value="true"/>
    <property name="ButtonImages" type="bool" value="true"/>

See http://git.xfce.org/xfce/xfce4-settings/tree/xfsettingsd/xsettings.xml?id=xfce4-settings-4.10.0

I wonder if this is somehow related to bug 867638 where the cursor has theme selected. Somehow xfsettingsd fails to apply the settings.

This is definitely related to the other bug, xfsettingsd doesn't set the xsettings properties, see bug 867638 comment 1.

Manually activating the options works, of course.

Sure, but that doesn't fix the bug and we already know that because it's the same for the mouse cursor and the window decorations. As soon as you launch one od the settings caplets, the settings channel is created. The real question is: Why does xfsettingsd not create the channels on start?

The checkbox for "Show icons" in the plugin's dialog should be disabled, grayed or at least with a nice tooltip saying that appearance settings are globally applied. I hope that should be more user friendly.
Maybe this should go to upstream as a feature request.
I don't see much sense in having icons in the desktop menu, but not in the plugin. So upstream should think about removing the specific checkbox from the plugin's dialog. 
(Xfce bugzilla is currently down, otherwise I would have reported myself.)

*** Bug 872691 has been marked as a duplicate of this bug. ***

(In reply to comment #8)
> The checkbox for "Show icons" in the plugin's dialog should be disabled,
> grayed or at least with a nice tooltip saying that appearance settings are
> globally applied. I hope that should be more user friendly.
> Maybe this should go to upstream as a feature request.

Yes, please discuss this with the developers and not with us. This bug report is about the bug in xfsettingsd and not about a feature request.

> (Xfce bugzilla is currently down, otherwise I would have reported myself.)

Have you been able to do this in the meantime? If so, please cc cwickert at fpo to the upstream bug.

(In reply to comment #8)
I've found an upstream bug report with a patch suggestion that tries to give more power to the checkbox in the plugin. Not sure if that can be the general solution.

See https://bugzilla.xfce.org/show_bug.cgi?id=9365

*** Bug 879061 has been marked as a duplicate of this bug. ***

The problem for me looks like an error in /etc/xdg/xfce4/xfconf/xfce-perchannel-xml/xsettings.xml, which causes xfconfd ignore the whole file.
The erroneous lines:
  <property name="Net" type="empty">
    <property name="ThemeName" type="Adwaita"/>
    <property name="IconThemeName" type="Fedora"/>
There should be of course:
  <property name="Net" type="empty">
    <property name="ThemeName" type="string" value="Adwaita"/>
    <property name="IconThemeName" type="string" value="Fedora"/>

xfconfd complains about this at startup.

Thanks, I must have been blind to not see this.

Ok, i fixed this in git and built an update for F18, however rawhide currently has broken deps. I first need to build the rawhide package before I can push this to F18.

xfce4-settings-4.10.0-4.fc18 has been submitted as an update for Fedora 18.
https://admin.fedoraproject.org/updates/xfce4-settings-4.10.0-4.fc18

Package xfce4-settings-4.10.0-4.fc18:
* should fix your issue,
* was pushed to the Fedora 18 testing repository,
* should be available at your local mirror within two days.
Update it with:
# su -c 'yum update --enablerepo=updates-testing xfce4-settings-4.10.0-4.fc18'
as soon as you are able to.
Please go to the following url:
https://admin.fedoraproject.org/updates/FEDORA-2013-1563/xfce4-settings-4.10.0-4.fc18
then log in and leave karma (feedback).

xfce4-settings-4.10.0-4.fc18 has been pushed to the Fedora 18 stable repository.  If problems still persist, please make note of it in this bug report.