If separate backdrops are specified for the two monitors and then the "stretch single backdrop onto all monitors" checkbox is checked, unchecking it will not restore the two original backdrops. It stays in stretched mode.

If the stretch option is turned off, checking the individual screen's "Show Image" checkbox generates the following warning:

** (xfdesktop:11575): CRITICAL **: xfce_desktop_peek_backdrop: assertion `XFCE_IS_DESKTOP(desktop) && GTK_WIDGET_REALIZED(GTK_WIDGET(desktop)) && monitor < desktop->priv->nbackdrops' failed

According to the random print statements I tossed into the code, this is because desktop->priv->nbackdrops is not updated to 2 as it should be. (monitor and nbackdrops are both 1)

From what I can determine, the problem is caused by handle_xinerama_unstretch never being called. I traced this back to lines 796 to 800 of xfce-desktop.c:

796: if(stretch == desktop->priv->xinerama_stretch
797:       || desktop->priv->nbackdrops <= 1)
798: {
799:       return;
800: }

It seems to skip the call to handle_xinerama_unstretch because of line 797. If the backdrop is stretched, nbackdrops will be one, causing the function to return right there and making it impossible to unstretch the backdrop.

I tried commenting out line 797. This did allow the backdrop to unstretch back to the first monitor, but left the second one black. The only way to change the second monitor was by choosing a different image for the wallpaper or by changing the color.

I think I'm really close to fixing this, but I'm too tired to think right now.