LWJGL version: 2.8.0 (2.7.1 does not exhibit this behaviour)
Java versions: Oracle Java 6 32-bit, Oracle Java 6 64-bit, OpenJDK 6 64-bit, Oracle Java 7 64-bit
OS: Ubuntu linux 64-bit, 32-bit
When using Display.setParent(Canvas), window manager keys such as Alt-Tab are intercepted by the LWJGL keyboard handling and do not allow the system to perform the usual switch-window action.
It was suggested that I report this as an RFE in IRC #lwjgl channel, but as this is a regression from 2.7.1 behaviour I believe it should be considered a bug.
This issue should be fixed in the next nightly build of LWJGL (and hence in the forthcoming LWJGL 2.8.2 release).
Thanks for finding and reporting the issue.