I haven't been able to reproduce this problem, but this Ubuntu user gets it consistently:

"I can right click someone on the status window or the panel application, select "Preferences", go to User interface -> Status Window and then uncheck "Show status window". This only works temporarily, however. Whenever I quit and then restart, the status window is still shown. It's as is the setting was never saved."

Looking at gconf dumps (see the launchpad bug for the logs that he did), it looks like workrave hides the window and sets the setting correctly, but then we he quits and starts workrave again, while the setting is still fine, the window is not hidden.

I don't really know how to investigate that problem further.  So perhaps you'll have some ideas about what to do next.

I also can't reproduce this problem, but:

It seems Workrave only enables the status window without user intervention if the window is de-iconized. This does not seem to happen at startup when using gnome/compiz. Perhaps the user is using a different window manager that somehow generates a de-iconize event.

Anyways. I removed the offending code. Workrave now only enables the status window when the user explicitly enables it in the preferences.