I am using an Asus EEE running Jaunty (9.04 Netbook Remix) and I have
the same exact problem.  Works fine if I set it to suspend when the lid
is closed, but if I set it to do nothing when the lid is closed and
sleep after a certain amount of time, it will never sleep if the lid is
closed.

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fail to sleep when lid is closed
https://bugs.launchpad.net/bugs/37626
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