You implemented the round to the series of values given by df.value1. The return type is thus a Series. You must assign that series back to the dataframe (or another dataframe with the same Index).
Also, there are pandas.Series.round method which is basically a shorthand for pandas.Series.apply(np.round).
In[2]:
df.value1 = df.value1.round()
print df
Out[2]:
item value1 value2
0 a 1 1.3
1 a 2 2.5
2 a 0 0.0
3 b 3 -1.0
4 b 5 -1.0