i did blfs in chroot to..
I subscribe to the above. Just compile X in chroot but dont config it, (although someguys from the LFS IRC support channel told me that this should be possible to...).
I had some problems relating to the 'uname -r' command. This is used to determine you're current running kernel modules directory, in "/lib/modules/'uname -r'/kernel/..". When running 'uname -r' in chroot it comes with the name of the kernel of you're host system. When you are running the same kernel this shouldnt be a problem, but my host-kernel was named '2.4.23-mdk', and that caused some problem. But with a little rewriting of the blfs-install instructions everything worked out fine.
By the way similar problems may occur when running 'depmod' in chroot.
Now i am running a fully functional and very satisfying BLFS system, completely build in chroot untill i could use X and a webbrowser. So i think building blfs in chroot is very do-able..