The option works when icons are added or removed....
For example , if you insert a usb disk the icons are auto aligned ...
Another thing , i only installed the new nautilus_2.20.0-0ubuntu7_i386.deb and 
none of the others *.deb
Try to move an icon to any place [out of the grid] then , disable Keep Aligned 
, and reenable , the icon should be auto sorted....

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Auto Arrange Desktop Icons
https://bugs.launchpad.net/bugs/20284
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