<iframe>-s are not fragmented between regions, but instead they're treated as monolithic elements and they get sliced. This happens for both seamless and "normal" iframes.
Note that this breaks compatibility with the Regions implementation in IE10.
The regions implementation in IE10 takes the *content* of the iframe and puts it into the named flow. So this behavior by itself may not be an incompatibility. An entire iframe might be monolithic - I haven't seen a specification that says one way or another.
It actually seems that seamless iframes are *NOT* enabled in WebKit nightlies, so the initial comment only applies to normal iframes. And in this scenario I agree with you Alan that this is not a bug.
However, what should be behavior for seamless iframes? These do behave quite differently from normal iframes.
Iframes should not be fragmented across regions, they should be treated like monolithic elements. Seamless iframes support was removed from WK.