Nice find, Michael Vanderheeren!

killall notify-osd solved the problem for me. Glad to know that there is
nothing wrong with the code, just the initialization order.

-- 
notify-osd notifications are on top of panel
https://bugs.launchpad.net/bugs/332333
You received this bug notification because you are a member of Notify
OSD Developers, which is subscribed to Notify OSD.

Status in Canonical's Notification Display Agent: Confirmed

Bug description:
This occured on my eee pc 900. I'm guessing this is because of the small screen 
resolution.
My desktop works fine, showing them below the panel.

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