The new XFCE 4.12 came with some very annoying new default changes that are only switchable through hidden configurations. I have no idea why the devs decided it was a good idea to change how things have worked in the past and leave us with no easy method of switching it back. It is this kind of update behavior from developers which makes me seriously contemplate switching to a different project. After a week of trying to figure out how to fix this one rather simple annoyance, I finally found the answer.
You use to be able to wrap switch virtual desktops with the mouse from both the desktop and while your mouse is hovered over the Workspace Switcher panel. For some reason wrapping is now disabled by default while the mouse is over the Workspace Switcher panel, but not when the mouse is on the desktop. To fix this read below.
First we need to open our panel preferences (right click on your panel go to Panel --> Panel Preferences.
Click on the items tab (if you have more than one panel you will need to select the the panel that your workspace switcher is on from the panel dropdown menu on top).
Hover your mouse over the 'Workspace Switcher' icon. A description will appear. Make a note on which pager number it lists. Mine is Pager-2 on Panel 1. I also have a second Workspace Switcher on Pager-22 on Panel 2.
Now close out of your panel preferences and open a new terminal.
In your terminal type this command:
%: xfconf-query -c xfce4-panel -p /plugins/plugin-2/wrap-workspaces -s true --create -t bool
**Notice the section that says 'plugin-2' change that number to the pager number we just located. Again mine is 2 and 22. Do this command for each workspace switcher you have on your panel(s).
No X restart should be necessary.