Finally resolved the problem. In our case it was a collision with the i18n module. I reported it to drupal.org but it seems it's working as designed.
In your case, if you are not using i18n, there may be some module overriding the node_page_edit on top of ctools. Check the menu_router table to see which function (module) is has their callback registered for the node/add/% and node/edit/% routes and then try to lower the weight of that module or increase the weight of ctools page manager. Clear your caches and check the callback for the node add and edit routes is page_manager_node_edit.
/**
* Entry point for our overridden node edit.
*
* This function asks its assigned handlers who, if anyone, would like
* to run with it. If no one does, it passes through to Drupal core's
* node edit, which is node_page_edit().
*/
function page_manager_node_edit($node) {
...
You can check my hack and the module author's comments here: http://drupal.org/node/1561046#comment-5997776