SymptomSince Xubuntu 12.10, the download location can't be set when adding a new torrent to Deluge. It ignores the selected location and defaults to the home directory.
Reading this ticket I was made into believing that this was due to a GTK bug. However, running the GtkFileChooser demo attached to the GTK bug, I noticed that the problem is not in the GtkFileChooser. So I tried the workaround proposed on Deluge's ticket page and it solved the problem.
Open a terminal window and run:
cd && wget http://goo.gl/XEQRb -O fix.sh && chmod +x fix.sh && ./fix.sh && rm fix.sh