OK, fixed problem, it was on the Android-VNC-Viewer client side.
'Fit to screen' scaling mode breaks input, you have to use standard 'touch mouse pad and zoom' input and 'zoomable' scaling, then in these modes click + to zoom to one scale below full screen so the N900 display fully shows without being covered by the android controls on the bottom of the screen.
Then switch to 'Mouse Pointer Control Mode' and enjoy your maemo5 apps on your android tablet over Bluetooth-PAN or WiFi. If you use bluetooth audio then the only thing missing is a physical keyboard to interact with your N900. I use Simple Brightness Applet dialed to lowest brightness and switched to the keep display on mode so that my N900 doesn’t sleep and black out the VNC video feed.
In a hotel where you are using your N900 to feed video to the TV over an AV cable this mode also allows you to remote control video playback even if the VNC is unable to support(and doesen't even try) that video bandwidth. 64 color mode mode works for GPS and 24-bit color is required for viewing pictures but this gets pretty slow when piping through bluetooth.
Trying to remember if there is a way to have a second X screen independent from the one that is fed to the N900's display and can be active even when I sleep the N900's display with the side switch.

With VNC and Bluetooth PAN finally working I feel like my tablet is finally becoming a useful companion device to my N900 which remains the pinnacle of mobile devices IMHO. It is so damn cool to see my Maemo apps projected onto the tablet. Damn, damn, damn it is cool to see my Maemo desktop on a big screen, but it makes me sad that Maemo5 and some apps are not open enough to port to the Nexus.