Currently embedded notebook pages do not work if you have "must login" set, and the user has not logged in prior to hitting the page. While the notebook pages allow embedding in i-frames, the login page doesn't so the redirect to login in the iframe doesn't actually display.
Thank you for the note. As you described, we currently do not show the login page in the iframe. We do not allow this because of security reasons. As such, we're unlikely to make updates in this area.
Note that a potential workaround is that you could use password protect the notebook instead of requiring login. This would still provide an additional layer of visibility protection.