BTW, Jim Bauwens patch fixed the background issue, but the menus were still a bit crumpled due to xthickness/ythickness = 0. The issue was fixed completely for me by changing the line
widget "*PanelApplet*" style "panel"
to
widget_class "*PanelApplet*" style "panel"
On a side not, I do hope, themeing Gtk+3 will be easier than this mess.
BTW, Jim Bauwens patch fixed the background issue, but the menus were still a bit crumpled due to xthickness/ ythickness = 0. The issue was fixed completely for me by changing the line
widget "*PanelApplet*" style "panel"
to
widget_class "*PanelApplet*" style "panel"
On a side not, I do hope, themeing Gtk+3 will be easier than this mess.