Hi,
I also had troubles forwarding X11 to my Windows 7 host running the Xming X-Server:
tail /var/log/messages
error: Failed to allocate internet-domain X11 display socket.
I solved the problem by adding this to /etc/ssh/sshd_config
AddressFamily inet
Now everything is fine and my PuTTY sets automatically the DISPLAY variable for me.
I hope this can help.