This behaviour by my Xubuntu 16.04 has started about a month ago, maybe a bit more. The behaviour of Thunar is normal, i.e. selecting "show hidden files and folders" does what it's supposed to, and deselecting it hides them.
The problem is when trying to either open a file or save a file in programs like Firefox, Leafpad and Mousepad (text editors), LibreOffice Writer, and Abiword.
The only other info that may be useful is the fact that before I upgraded to 16.04, when in 14.04, Thunar (Xubuntu's file manager) would sometimes keep showing hidden files and folders even when the box was not ticked.
Just to be sure there's no confusion, no matter the setting in thunar to show/hide hidden files, attempting to open or save a file in the programs listed above always shows the hidden files.