In the Xfce menu, you can't hide the system menus included. See my screenshot for an example (Ubuntu Hoary): http://lila-theme.uni.cc/andrewski/rep/menuwoes.png I've attached my bigmenu.xml file, where you can see that each visible entry is set to false.
Created attachment 209 bigmenu.xml
You sure that's the file actually being used? This works fine for me here.
The Xfce menu properties shows that file, so I don't see why it wouldn't be used. The funny thing is that if I hide/show the last two items (Run and Quit), they update immediately; it's only the preceding items that aren't affected.
I saved the menu file you attached, and set that as the menu file for my panel plugin, and it works as it should. Tried using the menueditor to set some of them hidden and some not; worked fine.