The settings manager shouldn't take care to the "NoDisplay" key in desktop files, because sometimes you don't want to make it show in the menu but still want it to show in the settings manager. To disable a desktop file in the settings manager, there's another way : just removing X-XFCE-SettingsDialog;X-XFCE-SystemSettings; from category key.
That is not the purpose of the key.
Definitely not blocking for 4.10. It is behaving the way it was designed to work.
Indeed. If you want to modify this, ship a custom menu file for the settings editor.