Using QGIS v. 1.9 (1.7 does not seem to be available for Ubuntu Linux 12.04), do the following:
Create new project, specify coordinate system by clicking on button in bottom right hand corner, enable on the fly CRS transformation, set projection to WGS 84 / UTM Zone 18S. Pass mouse over project window and UTM coordinates appear in coordinates window in status bar at the bottom.
Add delimited text layer in decimal degrees. When asked for projection, specify same projection as in (1). Points in the layer are plotted but, mousing over the map, the coordinates in the coordinates window are now in decimal degrees (even though the projection is set to UTM).
Is there something I am missing here? I have tried doing this in so many ways, so many times, but the result is always the same. I seem to be setting the projection correctly but only decimal degrees show in the coordinates window.
With thanks, Martin