Program terminated with signal 11, Segmentation fault.
#0  xcb_xv_query_adaptors_info_iterator (R=R@entry=0x0) at xv.c:690
690	    return i;
(gdb) t a a bt full

Thread 1 (Thread 0x7f30ad7cfa00 (LWP 21497)):
#0  xcb_xv_query_adaptors_info_iterator (R=R@entry=0x0) at xv.c:690
No locals.
#1  0x00000000004310fb in ephyrXVPrivQueryHostAdaptors (a_this=0x22e0150) at ephyrvideo.c:482
        conn = <optimized out>
        i = 0
        is_ok = 0
        e = 0x0
        xscreen = 0x22d53f8
        base_port_id = 0
        port_priv_offset = 0
        it = {data = 0x0, rem = 0, index = 0}
#2  ephyrXVPrivNew () at ephyrvideo.c:260
        xv_priv = 0x22e0150
#3  ephyrInitVideo (pScreen=0x22de060) at ephyrvideo.c:230
        screen = <optimized out>
        xv_priv = 0x0
#4  0x000000000042b34d in ephyrInitScreen (pScreen=0x22de060) at ephyr.c:664
        screen = 0x22ce5d0
#5  0x00000000004af25b in KdScreenInit (pScreen=pScreen@entry=0x22de060, argc=argc@entry=2, 
    argv=argv@entry=0x7ffff56f26d8) at kdrive.c:901
        screen = 0x22ce5d0
        card = 0x22ce590
        rotated = <optimized out>
        width = 640
        height = 480
        width_mmp = 0x22ce608
        height_mmp = 0x22ce60c
#6  0x0000000000472971 in AddScreen (pfnInit=pfnInit@entry=0x4af040 <KdScreenInit>, 
    argc=argc@entry=2, argv=argv@entry=0x7ffff56f26d8) at dispatch.c:3866
        i = 0
        pScreen = 0x22de060
        ret = <optimized out>
#7  0x00000000004af729 in KdAddScreen (argv=<optimized out>, argc=<optimized out>, 
    screen=<optimized out>, pScreenInfo=<optimized out>) at kdrive.c:1062
        i = <optimized out>
#8  KdInitOutput (pScreenInfo=pScreenInfo@entry=0x86e320 <screenInfo>, argc=argc@entry=2, 
    argv=argv@entry=0x7ffff56f26d8) at kdrive.c:1125
        card = 0x22ce590
        screen = 0x22ce5d0
#9  0x000000000042ce37 in InitOutput (pScreenInfo=pScreenInfo@entry=0x86e320 <screenInfo>, 
    argc=argc@entry=2, argv=argv@entry=0x7ffff56f26d8) at ephyrinit.c:88
No locals.
#10 0x000000000047644b in dix_main (argc=2, argv=0x7ffff56f26d8, envp=<optimized out>)
    at main.c:202
        i = <optimized out>
        alwaysCheckForInput = {0, 1}
#11 0x00007f30a8aaeb15 in __libc_start_main (main=0x429fe0 <main>, argc=2, 
    ubp_av=0x7ffff56f26d8, init=<optimized out>, fini=<optimized out>, 
    rtld_fini=<optimized out>, stack_end=0x7ffff56f26c8) at libc-start.c:274
        result = <optimized out>
        unwind_buf = {cancel_jmp_buf = {{jmp_buf = {0, -5180591105851376941, 4366352, 
                140737311090384, 0, 0, 5180614051418225363, 5078800904215608019}, 
              mask_was_saved = 0}}, priv = {pad = {0x0, 0x0, 0x5c0b80 <__libc_csu_init>, 
              0x7ffff56f26d8}, data = {prev = 0x0, cleanup = 0x0, canceltype = 6032256}}}
        not_first_call = <optimized out>
#12 0x000000000042a039 in _start ()
No symbol table info available.
(gdb)

Could there be any problem from X server side? or can we handle it to terminate with appropriate error instead of crash?
I checked on Fedora 23 and same is the case there with xorg-x11-server-Xephyr-1.18.1-3.fc23.x86_64

Oh that's cute. Your X server supports the XVIDEO extension, but lists no adaptors. Out of curiosity, which X server are you using on Windows, and what does "xvinfo" print in this situation?

Customer wants an update on this bz soon as they want to rollout a few servers using Xephyr in autumn and won't use the workaround permanently.

It's a bug in Xephyr. I've sent a patch for it upstream:

https://lists.freedesktop.org/archives/xorg-devel/2016-July/050322.html

I expect this to be fixed in 7.3, just waiting on acks.

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://rhn.redhat.com/errata/RHBA-2016-2293.html