It looks like this is an intended behavior (i.e. [d]effective by
design).

It seams to be that Log-off/Log-on step is crucial here. Since by
default Ubuntu invokes xdg-user-dirs-update, which resets empty folders
corresponding to anything set in .config/user_dirs.dirs to $HOME and
nautilus respects this setting further on.

** Changed in: nautilus (Ubuntu)
     Assignee: Ubuntu Desktop Bugs (desktop-bugs) => (unassigned)
       Status: Triaged => Invalid

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nautilus does not respect desktop_is_home_dir setting
https://bugs.launchpad.net/bugs/273946
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