It seems that the Xnest manpage makes no mention of the -ac option, which disables access controls to the running X server. It would be nice to correct that, as I had to find that option elsewhere.
These types of issues should be filed directly in the upstream X.Org bugzilla, since they are not operating system specific. You can file a bug for X.Org at: http://bugs.freedesktop.org in the "xorg" component. Once the issue has been filed there, it should get reviewed by an X.Org developer during the upstream development cycle. Any fixes or enhancements that they implement for your request will potentially appear in future releases of X.Org, which will eventually be incorporated into Fedora Core in the future. As a side note, both Fedora Core 1, and XFree86 are no longer maintained by Red Hat. Fedora Core 2 and 3, and Red Hat Enterprise Linux are the only releases which are currently maintained. Setting status to "WONTFIX", although it may be included in future releases if reported upstream and they decide to add what is requested.