This does not work headphones, only with headsets at the moment. (The definition of "headset" here being headphones with microphone, like Bluetooth headsets and the included headphones as opposed to normal headphones without a microphone.)

I don't think it's clashing with headphoned, as headphoned + Panucci is the combination I use to play most mixes on the N900 nowadays, and I'm using "Auto-play on headset" all the time. Please try to reproduce it with the included cable headset.