Here are some common problems:
lbxproxy exits with an "access denied" error.
This means the LOCAL system isn't accepting connections from the REMOTE system due to permissions errors. See the Remote X Apps Mini-HOWTO for details on these issues.
As a simple trouble-shooting measure, try running a simple X app like xclock on REMOTE and have it display on the local system without using lbxproxy:
$ xclock -display LOCAL:0
If that doesn't work, it's xhost or some other basic X problem, not LBX.