I was under the impression that the Fancy/Fast graphics settings would be a purely visual thing, with lighting/textures/what have you turned down, essentially. But reading this question, it appears there are some functional differences between the two as well (the example given is that you can place torches on leaf blocks in Fast mode, but not in Fancy mode).
Is this just the result of a glitch, or is it intentional? Are there other differences in gameplay between the two, whether they're glitches or designed?