Comment 5 for bug 290747

I have solved my problem, and will post the steps here. I'm not sure if this should be considered a 'wishlist' item, or if this is just how the operating system is supposed to work -- but it's very frustrating that this option is buried. I've posted the related steps to the Ubuntu forums and hopefully others looking to forward X11 sessions to their Hardy/Intrepid guests will find this information useful.

For those of you struggling with this in Hardy or Intrepid (I'm pretty sure this isn't necessary in Gutsy):

The default install of both Hardy and Gutsy are almost completely ready to act as X11 guests (that is, you log into a *nix server from your Ubuntu desktop, run a command, and a GUI program appears on your Ubuntu machine).

The only steps needed are:

[B]Enable TCP connections to Xserver (only need to do this once)
-System > Administration > Login Window
-Click the Security tab
-Uncheck 'Deny TCP connections to Xserver'
-Restart the Ubuntu computer[/B]

Enable xauth forwarding (do this only once per Ubuntu session)
-Open a terminal
-Type 'xhost +' and press Enter

Connect to the server (do this for every SSH session, obviously)
-Open a terminal
-Type 'ssh -X <email address hidden>' and press Enter

Hope this saves some frustration!