I've just compiled xfce4.6 via the pkg-xfce stuff from debian - don't really know if that matters. Anyhow. My desktop icons settings was that I only wanted to see trash and removable media. Currently with xfdesktop 4.6 I get all to see icons from all files and directories in my home dir on top of the the Home, Trash and FileSystem icons. Currently I have no other option then to disable the icons all together.
It seems so be related to Thunar, which does not show a special Desktop entry among other things. I've also installed the packages on my laptop and there everything works perfectly. In Thunar I also have a larger 'Go' menu, which lists more locations. Re-installing thunar and related packages doesn't make a difference. Maybe some settings from the previous xfce install are still lingering...
Please don't touch the milestone setting; that's not for you to set. The settings only control what *special* icons are shown. The contents of ~/Desktop will always be shown; that's kinda the point of desktop icons. If you're seeing the contents of your home directory, then you need to fix your ~/.config/user-dirs.dirs configuration file. (This should be set to the default of $HOME/Desktop, unless you changed it yourself or your distro set a weird default, in which case you should take this up with them.)
I never knew I had this file :) You're completely right, fixing the settings in this file, fixes my problem. Thanks!