the title is wrong, should be:
creates ~/Desktop even when nautilus has ~ as the Desktop

The relevant gconf key is /apps/nautilus/preferences/desktop_is_home_dir (True 
or False)
Other than that, this is a valid bug report and I experience the same problem 
here.

** Changed in: xdg-user-dirs-gtk (Ubuntu)
       Status: New => Confirmed

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creates ~ even when nautilus has ~ as the Desktop
https://bugs.launchpad.net/bugs/122103
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