On Wed, Nov 30, 2016 at 10:40:09AM -0500, Scott Kostyshak wrote:
> 
> Thanks for the explanations. It seems we should report the LyX display
> bug you mention above, and then just not worry about the compilation
> failures.

I found that enclosing the nested macros in brace insets circumvents
both issues (display glitch and latex error). Unfortunately, lyx duly
removes the braces when reloading the document, so that this only
takes care of the display issue, in practice. See attached.

So, the conclusion is that the error is actually due to a limitation
of xkeyval.

-- 
Enrico
#LyX 1.6.10 created this file. For more info see http://www.lyx.org/
\lyxformat 345
\begin_document
\begin_header
\textclass scrartcl
\begin_preamble
\usepackage{a4wide}
\end_preamble
\options fleqn
\use_default_options false
\language ngerman
\inputencoding auto
\font_roman ae
\font_sans default
\font_typewriter default
\font_default_family default
\font_sc false
\font_osf false
\font_sf_scale 100
\font_tt_scale 100

\graphics default
\float_placement h
\paperfontsize 12
\spacing single
\use_hyperref false
\papersize default
\use_geometry false
\use_amsmath 2
\use_esint 0
\cite_engine basic
\use_bibtopic false
\paperorientation portrait
\secnumdepth 3
\tocdepth 3
\paragraph_separation skip
\defskip medskip
\quotes_language german
\papercolumns 1
\papersides 1
\paperpagestyle plain
\tracking_changes false
\output_changes false
\author "" 
\author "" 
\end_header

\begin_body

\begin_layout Standard
\begin_inset FormulaMacro
\renewcommand{\xyz}[2][42][28]{\sqrt{#1}+\ln\left(\frac{#2}{82}\right)}
\end_inset


\begin_inset Formula \[
\xyz[1][{\xyz[{\xyz[{\xyz[1][2]}][2]}][{\xyz[1][2]}]}]\]

\end_inset


\end_layout

\end_body
\end_document

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