Comment 7 for bug 51774

Confirmed on Ubuntu Server 9.10 - Please reset status.

Details:
/etc/ssh/sshd_config contained
X11Forwarding yes
X11DisplayOffset 10

ssh -X and ssh -Y worked fine, but DISPLAY was not set, and the result was the following:
$ meld foo bar
/var/lib/python-support/python2.5/gtk-2.0/gtk/__init__.py:72: GtkWarning: could not open display
  warnings.warn(str(e), _gtk.Warning)
/usr/lib/meld/gnomeglade.py:123: GtkWarning: cannot open display:
  self.program = gnome.program_init(name, version)

Installing xauth worked:
$ sudo apt-get install xauth
$ logout
$ ssh -Y hostname
$ meld foo bar &