UseDisplayDevice does work when forcing an LCD to be the primary monitor.
However, I believe this only works with Xinerama because it requires two devices and screens to be set up. Then it is possible to force a monitor to each device with the UseDisplayDevice option. It doesn't seem to work with TwinView because it only requires one X-screen to be set up.
From nVidia's xconfig manual
TwinView - A single X screen is used. The NVIDIA driver conceals all information about multiple display devices from the X server; as far as X is concerned, there is only one screen.
For now I ditched TwinView and set up Xinerama because it just works.
I attached my working Xinerama enabled xorg.conf file for anyone interested.