GeoServer supports cascading WFS. This should work pretty well as its the same datastore that uDig uses, and they do lots of WFS with it. But some of the config options may be a bit funky, please report here and improve this page if anyone has success.

Ryan Hofschneider has played with it a bit against GeoServer 1.3.1beta, and has reports on his experiences. A few bugs and some advice:

I have done limited testing and have found that with the referenced changes all the WFS/WFS-T requests work via cascading, with the exception of GetFeatureWithLocks and LockFeature. (This isn't due to a bug, but simply because WFSFeatureStore does not implement the FeatureLocking methods.) The WFS server on the back end was a second instance of GeoServer.

Required for cascaded GetFeature requests to work at all:
http://jira.codehaus.org/browse/GEOS-628
http://jira.codehaus.org/browse/GEOT-860
http://jira.codehaus.org/browse/GEOS-629

Required for cascaded Transaction requests to work at all:
http://jira.codehaus.org/browse/GEOS-627

Pretty important, but not directly noticeable through casual testing:
http://jira.codehaus.org/browse/GEOS-630

Won't be noticed by most:
http://jira.codehaus.org/browse/GEOS-626

For the last issue:
http://jira.codehaus.org/browse/GEOT-861
I am sure I was able to trigger it through some request, and the code is obviously incorrect, but now I can't seem to get it to execute.

Most of the fixes are only a few lines, though admittedly that is from a "just-get-it-working-for-me" perspective and does not take into account the larger design.