I'm using a custom launcher/theme, and it might be necessary to restore it, or use it in parallel. These steps can be used to reset the default behavior.
Clear default in Home Settings > Applications > Manage Applications
Change default startup location of gnome-terminal
In your home folder
gedit .bashrc
Add the following lines at the bottom of the file:
# CHANGE DEFAULT LOCATION OF STARTUP
cd ~/Desktop
Reset Desktop Settings Back to Default in Ubuntu
Drop to a terminal by hitting CTRL + ALT + F1, login to your account, and run this command:
rm -rf .gnome .gnome2 .gconf .gconfd .metacity
Get back to your GUI desktop by hitting CTRL + ALT + F7
Logout and Logon
Your desktop settings are now reset