I am filing this report based on an email.  It is JDK1.4 RC1 feedback.   
See Comments for the email.  

I listed the platform as generic because it wasn't included in the email.  

import java.awt.*;
import java.awt.event.*;
import javax.swing.*;

public class AwtLockBug {

    public AwtLockBug() {
        new MyFrame();
        new MyFrame();
    }

    public class MyFrame extends JFrame {
        public MyFrame() {
            super();
            final MyFrame frame = this;
            addWindowListener(new WindowAdapter() {
                                  public void windowClosing(WindowEvent e) {
                                      System.exit(0);
                                  }
                                  public void windowDeactivated(WindowEvent e) {
                                      new ModalDialog(frame);
                                  }
                              });
            setBounds(0,0,100,100);
            setVisible(true);
        }
    }

    public class ModalDialog extends JDialog {
        public ModalDialog(Frame frame) {
            super(frame, "ModalDialog", true);
            setBounds(100,100,100,100);
            setVisible(true);
        }
    }

    public static void main(String args[]) {
        new AwtLockBug();
    }
}