This appears FIXED in Gutsy Gibbons!
It seems the 
-extension XFIXES 
was added.   I tested from a user account without an x session nor a $DISPLAY 
environment variable.   
vncserver :1 
Then it requested the password.
Then ...
vncserver -kill :1

In 
/home/username/.vnc/xstartup
I commented out the xterm line 
#xterm .....
 replaced twm with
gnome-session

Then started it again.
vncserver :1


Now tried vncviewer and got into the Gnome Desktop without problems.

It would be nice if VNC4 was compiled against a newer version of Xorg like 
someone mentioned earlier in Debian had done.
This is good news.

-- 
vnc4server does not start Desktop environment after security update
https://bugs.launchpad.net/bugs/78282
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