FVWM: Strange problem with localhost

Sorry if this is off topic, but I'm having a very weird problem with
the name "localhost" and I wonder if perhaps any of you folks could
help me to sort it out.

Basically, once I start up X and fvwm, I see that all of my xterm
windows are automagically inheriting the following environment variable
and the value shown:

     DISPLAY localhost:0.0

For reasons I'm none too clear on, this worked just fine for me earlier,
but I diddled a few things on this system since then and now I seem to
have broken it somehow.  Now, when I try to start up *any* browser (and
probably also any X application) I get rather cryptic failure messages.
The one from teh Opera browser is clear enough.  It says it cannot connect
to the X server on startup.

I futzed around trying to fix this problem for awhile and I managed to
discover that if I manually set DISPLAY instead to just :0.0 then suddenly
all my X applications start to work again.

Here is the output from the command "getent hosts localhost" on the system
in question:

::1               localhost
127.0.0.1         localhost  localhost.tristatelogic.com


What am I doing wrong?  Why doesn't the default value of localhost:0.0
for DISPLAY work just as well as :0.0 ?