Long time no post guys!
I never thought of that before, but it makes no sense that Bugenhagen wouldn't tell Nanaki. The only reason I can think of is that he wanted it to be a sort of final lesson for Nanaki before he could be considered 'mature'. If Nanaki is going to learn to be the guardian of Cosmo Canyon, he's going to have to learn to do a lot of different things, right? Fighting obviously, but other smaller details though. Those kind of lessons, Bugenhagen can teach him while he's still just a young'un, but he has to save the most important lessons for later.
By more important lessons, I mean the nature of sacrifice. Since Nanaki's just a kid, he probably has this very romantic image of fighting, like he'll always be the hero and be loved without harm coming to him. By showing him what happened to Seto, maybe Bugenhagen was trying to show Nanaki that things don't always work out as we might hope, and sometimes you have to sacrifice in order to protect what you love. Seto not only sacrificed the rest of his free life, he sacrificed his reputation by 'fleeing' to the rear. He must have known what Nanaki would think of him, but he didn't have time to explain.
So yeah, my interpretation is that Bugenhagen wanted to show Nanaki when he was mature in order to give him the perspective to see more than just "BAW! MY DADDY BE FROZEN!"
Of course, the creators just needed a plot device, but I like my idea better.
It's quite amusing how he reacts when you surface the sub after winning, too. I think he gets over excited. 
