Zend_Form's function setOptions is not capable handling multiple displayGroups when the form is created from a xml file. I used Zend_Config_Xml to access the form options and the whole form is set up like this. This is how the option representation looks like for one and two displaygroups coming from the xml:

one group

array(1) {
  ["DisplayGroup"] => array(3) {
    ["name"] => string(7) "contact"
    ["elements"] => array(4) {
        ["ElementName1"] => string(9) "firstname"
        ["ElementName2"] => string(8) "lastname"
        ["ElementName3"] => string(5) "email"
        ["ElementName4"] => string(6) "mobile"
    }
    ["options"] => array(1) {
      ["legend"] => string(15) "Contact Details"
    }
  }
}

two groups

 
array(1) {
  ["DisplayGroup"] => array(2) {
    [0] => array(3) {
      ["name"] => string(7) "contact"
      ["elements"] => array(4) {
        ["ElementName1"] => string(9) "firstname"
        ["ElementName2"] => string(8) "lastname"
        ["ElementName3"] => string(5) "email"
        ["ElementName4"] => string(6) "mobile"
      }
      ["options"] => array(1) {
        ["legend"] => string(15) "Contact Details"
      }
    }
    [1] => array(3) {
      ["name"] => string(5) "login"
      ["elements"] => array(1) {
        ["ElementName1"] => string(8) "username"
      }
      ["options"] => array(1) {
        ["legend"] => string(13) "Login Details"
      }
    }
  }
}

I created a little patch for Zend_Form which handles the displaygroups properly. The bug exists in 1.11 and 1.10.8 and probably in earlier versions as well.