Why don't you try a fresh centos5 install and a simple 'yum install freenx' to see if that works for you? If you don't have a spare text box you can do it under vmware. If that works, then you can compare the working configuration to the one that doesn't work to pin down the difference.
thanks Les, yes, this seems like the way to go when I have more time to give freenx. I like freenx more that vnc, and feel like I should be close to getting it up.
The only other thing I can think of is that the connection may be trying
to restore a broken session or one that doesn't really exist. I used to see that on older versions of freenx but I've forgotten how to clean up the session info.
I tried nxserver --cleanup, as well as removing the old installation of freenx plus various files in ~ and reinstalling