Just yesterday before I updated to wine-1.1.23, the virtual desktop was working fine, but after I updated I can't get it to work. I open up winecfg and enable it, and then I close it and open winecfg again and my checkmark is still there, but winecfg doesn't open in the virtual desktop. I'm not sure if I should file this as a bug, so I'm wondering if anyone else is having this issue. Thanks.
I just tried this and the virtual desktop opens up on mine (Ubuntu 9.04 wine 1.1.23). I don't know witch operating system you have it on so it could be an issue with your system. You could always try reinstalling wine and see if that will fix your problem.