If I understood well, it seems that Seam 1.2.1 disables explicitly something wrong in the Seam logics.
You should start a LRC always when there's no LRC active, i.e. no LRC switch available. Anyway, I solved my problems (because I faced the same app break some days ago) avoiding explicitly the propagation using <s:conversationPropagation type="none"/> in the links to the begin method (I guess the solution in the workspace management's conversation switch).
I experienced a problem also with this approach, you can find the details in my last two posts in this topic:
if you face the same.. maybe you do the same coding error as me.. maybe not.
Another hint: It's a matter of time, but @Begin(id="") is going to be deprecated, there's a new way to define the conversation identifier explicitly in the pages.xml, also called business key definition, you can find the details here: