Ok, it turns out that the error message I was getting was due to the fact that the top layer in my layer dialog was not the same size as the overall image.
From the developer..
Quote:
First frame must be full size (and second frame must be full size too, if first frame is hidden).
Once I resized the top layer to the image size, I was able to save as an APNG.
I am also able to load back in animated PNGs with all layers intact. Still need to do some more testing but so far so good..
Here is one of my Tux animations saved as an animated PNG.
has .apng extension

has .png extension

So, who can see it animated and who can't?
I'm not sure which browsers other than Forefox and Opera support APNGs.
I'll start a thread on how to patch and compile libpng + how to compile the GIMP-APNG plugin in Linux.