vncserver not accessible using hostname in DISPLAY

Question

I have a vncserver running on a RHEL 6.8 box. When I access this session via a VNC viewer, I notice that I cannot run x programs (like xterm) if I modify the DISPLAY variable to include the server's hostname. For example:

[foo][/home/user]>echo $DISPLAY
:5.0
[foo][/home/user]>xhost +
access control disabled, clients can connect from any host
[foo][/home/user]>xterm

<xterm window opens - I type 'exit' in the xterm to close it>

[foo][/home/user]>hostname
foo.mydomain.com
[foo][/home/user]>export DISPLAY=foo.mydomain.com:5.0
[foo][/home/user]>xterm
xterm Xt error: Can't open display: foo.mydomain.com:5.0
[foo][/home/user]>xhost
xhost:  unable to open display "foo.mydomain.com:5.0"
[foo][home/user]

I can ping to myself using this hostname:

[foo][/home/user]>ping foo.mydomain.com
PING foo.mydomain.com (192.168.1.200) 56(84) bytes of data.
64 bytes from foo.mydomain.com (192.168.1.200): icmp_seq=1 ttl=64 time=0.026 ms
64 bytes from foo.mydomain.com (192.168.1.200): icmp_seq=2 ttl=64 time=0.027 ms
64 bytes from foo.mydomain.com (192.168.1.200): icmp_seq=3 ttl=64 time=0.029 ms

Here's the VNC entry in the process list:

user   22129     1  0 16:15 pts/70   00:00:22 /usr/bin/Xvnc :5 -desktop foo.mydomain.com:5 (user) -auth /home/user/.Xauthority -geometry 1270x1014 -rfbwait 30000 -rfbauth /home/user/.vnc/passwd -rfbport 5905 -fp catalogue:/etc/X11/fontpath.d -pn

And the contents of .Xauthority:

[foo][/home/user]>xauth
Using authority file /home/user/.Xauthority
xauth> list
foo.mydomain.com:5  MIT-MAGIC-COOKIE-1  <long hex value>
foo.mydomain.com/unix:5  MIT-MAGIC-COOKIE-1  <same long hex value as above>
xauth> 

DISCLOSURE: I realize that whether DISPLAY contains the hostname or not makes little difference on the local system. The issue I'm really trying to figure out is why I have the same problem exporting a DISPLAY from a remote host to this VNC server - I get the same "Can't open display" message. In the past when I've gotten that message, the problem was always xhost not allowing remote connections. But this time setting "xhost +" did not help. I thought the fact that using a hostname in the DISPLAY var on the local machine also triggering the problem was a clue.

Any thoughts on how to debug this problem? Thanks!