I was having the same problem, running with `gdmflexiserver -n -l`.

I removed Network Manager from the GNOME Session for that user, and the
problem went away.

Details:
Ubuntu 7.04 running on an older Pentium 4 desktop

Steps to reproduce (for me):
0. Logged in as main admin user "sandy".
1. Created regular (non-admin) user "test1".
2. Started GDM in XNest by running `gdmflexiserver -n -l`.
3. Logged in as user "test1".
4. Switched desktops a few times in the main X session (as "sandy").

Expected result:
Desktops switch, and "test1" XNest window is stil there when I come back to the 
first desktop.

Actual result:
Desktops switch, but "test1" XNest window is blown away at some point during 
the switching, and is no longer there when I come back to the first desktop.

I turned off GNOME Session programs one by one until the problem finally
went away by removing Network Manager from the GNOME Session.  Now I get
the expected result after following the above steps.

-- 
login in nested window dies changing workspace
https://bugs.launchpad.net/bugs/73931
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