From upstream bug: "Yes, you are not running xfce4-notifyd hence its settings dialog has no effect. If you have several notifications daemons installed there is no way to predict which one will be used (DBUS magic), I would say you need to remove notify-osd."
So either this "dbus magic" needs to be fixed, or the xfce4-notifyd package should be set to conflict with notify-osd.
From upstream bug: "Yes, you are not running xfce4-notifyd hence its settings dialog has no effect. If you have several notifications daemons installed there is no way to predict which one will be used (DBUS magic), I would say you need to remove notify-osd."
So either this "dbus magic" needs to be fixed, or the xfce4-notifyd package should be set to conflict with notify-osd.