Both "Sawfish" and "window manager" are arcana most people don't understand; 
the other option really is to remove the menu item entirely.

There are already too many items directly under Preferences

Of course, the menu name doesn't have to "Sawfish window manager", and there are
probably other entries in Preferences that could be moved.

But, if you'll allow me to make another suggestion... (See new title + dependency.)

The other suggestion is of course the right one, but it involves writing 
a significant chunk of new code, which we don't plan to do for Sawfish
since it's not the default WM. We would incorporate that change if 
it were done by the upstream Sawfish developers, though.

gnome-window-properties correctly starts sawfish configurator with current CVS
version of Sawfish. Also, with a package built using .spec file on CVS (with a
couple of minor adjustments necessary to include all files correctly),
individual .desktop files for preferences aren't included, so I get exactly the
setup I want. Any change for a new package in Red Hat updates?

Another part of the story is that my primary reason for wanting Sawfish in the
first place, is that it allows me to work around GNOME's default of putting the
panel in front of all windows, which I find incredibly annoying...