In my hands, when I start debian lxde and the zenity window shows, if I wait that the blurred image on the background turns into the "ctrl-back to return to dashboard" text, and then push the ok button, lxde starts with no problem.
If I don't wait and click on ok while there's still the window with the Xephyr title, the script stalls at the ctrl-back screen with a cross cursor.

So yes, there's some problem in timings.