I've recreated this now. Steve, did you manually edit the Exec line of the desktop file? The only reason I ask is that I just created a fresh desktop file using gnome-desktop-item-edit, and entered the Exec line that you quoted, but gnome-desktop-item-edit doubled the number of backslashes in the unquoted string, so the desktop file actually worked correctly
I've recreated this now. Steve, did you manually edit the Exec line of the desktop file? The only reason I ask is that I just created a fresh desktop file using gnome-desktop- item-edit, and entered the Exec line that you quoted, but gnome-desktop- item-edit doubled the number of backslashes in the unquoted string, so the desktop file actually worked correctly