I tried renaming /usr/openwin/bin/xauth to a completely different name, deleted my .Xauthority file and I still get a new .Xauthority file created upon XDMCP login. So I don't understand what's happening.
Not sure it matters but I'm using CDE as my desktop.
I'm surprised that find -type -f ... isn't giving you an error. (It should be find -type f ... with no - before the f.) If a file is being sourced in /etc that is exporting DISPLAY, your search may be too specific. (There could be a tab instead of a space, there could be multiple spaces, or the export statement could be exporting multiple variables and DISPLAY might not be the first one in the list.) You might have more luck with the command:
find /etc -type f -exec grep -l DISPLAY {} +
but it is more likely that DISPLAY is being set in the tool that is starting up your terminal window or window manager.