Okay, thanks for the debugging steps. This seems to be multiple issues.
As Kai Jauch confirmed, the settings are indeed reverting to default
after logout/login or reboot. That is issue #1 and is primary to the
original bug report. To be fair, setting the option to suspend upon
laptop lid closed has not been working for me in Karmic for some time.
Worked fine with Intrepid and Jaunty. This compounds the issue, but here
are some results from debugging:
1.)Reset power options to default with: $ gconftool --recursive-unset 
/apps/gnome-power-manager
2.)Launching Preferences>Power Management shows most drop lists are blank or 
say "Do nothing". Specifically, under the Battery Power tab, laptop lid closed 
has "Do Nothing" selected.
3.)$ killall gnome-power-manager
4.)$ gnome-power-manager --verbose --no-daemon
5.)close laptop lid, screen is blank
6.)open laptop lid, screen is displayed
7.)use the battery applet in panel to suspend, wait 30 second while suspended, 
resume from suspend
8.)terminal shows: (gnome-power-manager:3755): devkit-power-gobject-DEBUG: DBUS 
timed out, but recovering
9.)open Preferences>Power Management. Select Battery Tab, change option for 
laptop lid closed to suspend
9.)close laptop lid. screen is blank. no suspend. setting is ignored
10.)open laptop lid. screen is displayed.
11.)open Preferences>Power Management. Select Battery Tab, observe laptop lid 
closed option is now set to "Blank screen"

Any more info I could provide to help with this?

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Power Management Settings Are Not Applied / Retained
https://bugs.launchpad.net/bugs/406599
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