I checked out xnest a while ago, looks like there's a new program for running X inside X.
startx -- /usr/bin/Xephyr :2
This will look at your .xinitrc file. Here is an example. I haven't taken the time to get this all fully configured. It will run this script, and when the script is done running, X will exit. This means that you can start up a bunch of X apps backgrounded, then you want to start your window manager in the foreground. This way when you exit your window manager, you will fall off the end of the script and X will exit.
#!/bin/bash xterm & blackbox
Now you can try out crazy window managers like ion without having to log out of whatever you normally use.