Karsten M. Self requested a manpage for Xephyr (on the Debian BTS). I guess one could be quickly written by copying the one of Xnest or so.
In case I do so for the Debian packaging in the future, I'll post it here.
Fixed in git last year, included in Xserver 1.6 release:
Author: Matthieu Herrb <firstname.lastname@example.org>
Date: Sun Sep 28 12:18:16 2008 +0200
Add a man page for Xephyr, with information from the README file.