@florin - I went ahead and added it as a new bug which has been
registered as bug #1001908

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https://bugs.launchpad.net/bugs/995840

Title:
  When laptop lid is closed screen locks even if it should not

Status in “gnome-power-manager” package in Ubuntu:
  Confirmed

Bug description:
  In power options the settings for When lid is closed are DO NOTHING
  both for on battery and on line power. But if I close the lid the
  computer locks.

  ProblemType: Bug
  DistroRelease: Ubuntu 12.04
  Package: powerman (not installed)
  ProcVersionSignature: Ubuntu 3.2.0-24.37-generic 3.2.14
  Uname: Linux 3.2.0-24-generic x86_64
  ApportVersion: 2.0.1-0ubuntu7
  Architecture: amd64
  Date: Mon May  7 11:39:04 2012
  InstallationMedia: Ubuntu 12.04 LTS "Precise Pangolin" - Release amd64 
(20120425)
  SourcePackage: powerman
  UpgradeStatus: No upgrade log present (probably fresh install)

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