After a bit more googling, I found this:

http://mirror.sg.depaul.edu/pub/x.org/R6.6/tars/RELNOTES.TXT
>For additional security you may install xterm without suid-root; however
>if you do, xterm will not be able to make utmp or utmpx entries.
(it's right down in 'Security Considerations',  near the bottom)

--
Lennon Victor Cook
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