ok, upgraded everything to v1.2.6 and now customizing the keybindings work, well except for the escape key.

oh, a tip for anyone who is trying to customize their buttons, be careful what you do. You only have 5 buttons to work with. If you accidentally assign a key to a function you didn't want, you will have to manually go into the prefs file in /.wesnoth (I just use midnight commander, it's just easier than the whole command line business) to edit it.