Here is some additional clarification on this. The original bug report
captures the immediate cause of the panel not auto-hiding:

"#3 Press <Alt><F1> to open main menu - Menu opens on screen"

Alt+F1 seems to negate the ability of the panel to auto-hide. A simple
workaround, until this is fixed, is to add the Cairo/Ubuntu menu back
into your panel. By default, the Super (Windows) key opens that menu (if
not, you can set it up in System > Preferences > Keyboard Shortcuts).
Using that, instead of Alt+F1, to access your applications menu will not
disable auto-hiding, and in fact will not even cause the panel to unhide
at all. I've been using this method for over a month now on Intrepid
with great success and no headaches.

A bug fix is obviously still in order but I thought folks might find
this method helpful in the mean time.

-- 
Auto-hide in gnome-panel
https://bugs.launchpad.net/bugs/45974
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