For me, the "do nothing" was available in the power management dialog in 
karmic. 
Now on a fresh install of Lucid alpha 2, it is gone, but it's again available 
and working after setting the GConf value.
I couldn't yet test the behaviour with an external screen with Lucid.

I believe it's fairly useless to keep the "blank screen" option while
deliberately hiding "do nothing" in power manager, as most laptops blank
the screen by hardware anyway when the lid is closed.

-- 
[Regression] No "do nothing" for laptop lid closed action
https://bugs.launchpad.net/bugs/416236
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