Well, after much searching why X11 forwarding was broken when I installed latest OpenSSH from source on ubuntu, I had hit a blank. xauth was installed, sshd was pointing to it, -vvv showed up nothing.
Well, it turned out I had just done the usual configure --prefix=/usr and the install had put all the defaults in /usr/etc/ssh without X11Forwarding being set!
Note to self - make sure you put --syscondir=/etc/ssh as well!!
Without ssh forwarding working properly, stuff like NX just doesn't work.