Have a look at the HIDDEN CUSTOMIZATIONS mentioned in xfdesktop's README:
If you're using the icon view, and would like to change how the text
looks, you have three things you can change: the opacity
(transparency) of the rounded text background, the color of the
rounded text background, and the color of the text itself.
You'd want to add something like this to your ~/.gtkrc-2.0 file:
style "xfdesktop-icon-view" {
XfdesktopIconView::label-alpha = 75
XfdesktopIconView::selected-label-alpha = 100
XfdesktopIconView::ellipsize-icon-labels = 1
XfdesktopIconView::tooltip-size = 128
XfdesktopIconView::shadow-x-offset = 1
XfdesktopIconView::shadow-y-offset = 1
XfdesktopIconView::shadow-color = "#ff0000"
XfdesktopIconView::selected-shadow-x-offset = 2
XfdesktopIconView::selected-shadow-y-offset = 2
XfdesktopIconView::selected-shadow-color = "#00ff00"
XfdesktopIconView::cell-spacing = 6
XfdesktopIconView::cell-padding = 6
XfdesktopIconView::cell-text-width-proportion = 2.5
base[NORMAL] = "#00ff00"
base[SELECTED] = "#5050ff"
base[ACTIVE] = "#0000ff"
fg[NORMAL] = "#ff0000"
fg[SELECTED] = "#ff0000"
fg[ACTIVE] = "#ff0000"
}
widget_class "*XfdesktopIconView*" style "xfdesktop-icon-view"
According to this XFCE forum post,
XfdesktopIconView::cell-text-width-proportion = 2.5
should be what you're looking for (try a higher value).
Edit Reading more of the thread I linked, I gather that
XfdesktopIconView::ellipsize-icon-labels = 0
should do a better job (that's already in the README excerpt... well, I didn't notice it).