In puppy 4.xx the modification of the number of virtual desktops is not always automatic. You have to manually configure it. For doing this you have to modify this file:
Open this file with a text editor (Geany is the default) and find this line:<!— Number of virtual desktops —> <Desktops count="2"/>
By default Puppy has the number 2 so that two virtual desktops will be active. Change this number to your desired number to get the desired virtual desktops.