Ah ha... at last, someone with the same problem as me :-)
I could never ever get those toolbar buttons in Name/IconAction mode to appear textured, as I've seen in many screenshots too.
Aye, I could make them borderless and all the other stuff but the texture just would not work!
Don't know if it makes a difference but I've got:
Magellan 2 - Latest Update
Workbench Replacement Mode
CyberVision64
1024x768x16
Cyberstorm 060/50Mhz - 128Mb RAM
If you get it working, give me a shout and let me know how to do it :-)