As pointed out a few comments ago, the actual code in libxklavier where
this error occurs is this:

#ifdef HAVE_XINPUT
 if (xkl_engine_priv(engine, features) | XKLF_DEVICE_DISCOVERY) {
  DevicePresence(display, xitype, xiclass);
  XSelectExtensionEvent(display,
          xkl_engine_priv(engine, root_window),
          &xiclass, 1);

There is an error with that function in it's current form (the if
statement always evaluates true, even if the X server has no XIE).
However, that isn't your issue here. The log from g-s-d clearly shows
that your X server has XIE loaded:

[1250597338,150,xklavier_xkb.c:xkl_xkb_init/]   XInputExtension found
(131, 66, 129)

...and your output of xdpyinfo supports this too. With that in mind, I
can't think of any reason why this code section would cause this error,
other than an issue with NX itself. I've spoken with the maintainer of
libxklavier too, and we agreed that this should be assigned to FreeNX
now (at least until we see a similar issue with Xorg)

** Changed in: gnome-settings-daemon (Ubuntu)
       Status: Incomplete => Invalid

** Also affects: freenx-server
   Importance: Undecided
       Status: New

-- 
The program 'gnome-settings-daemon' received an X Window System error. During 
on a FreeNX server suring a session.
https://bugs.launchpad.net/bugs/409621
You received this bug notification because you are a member of Ubuntu
Desktop Bugs, which is a bug assignee.

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