There is some bug in the VNC hooks that misses the borders on windows when using twm. This is the reason that Adam started hooking pixmaps as that somehow fixed it (he didn't do any thorough analysis). The borders are rendered properly, it's just that the VNC change tracker doesn't notice them so they are not properly sent to the viewer.
It's been discussed upstream, and we seem to be close to a fix. Upstream discussion: http://www.mail-archive.com/tigervnc-devel@lists.sourceforge.net/msg02355.html
Fixed in r25514.
No problems found with twm on SLED11.