It looks like I was wrong. I dug through the code and couldn't find anything causing the buff to be removed. In fact, you can initially cast the buff, but it gets removed at the next tick check.
Bottom line: it looks like this is all done client side. In addition, it looks like the client is able to tell the server to remove the buff, although I'm not sure exactly how that works.
I think a better way around this would be to add a rule in the source to allow sitting HP/Mana regen while moving, then allow it to be toggleable with the rules system. It would probably end up being a custom modification though, because it could cause some class balancing issues, and definitely doesn't mimic Live (and we would need to use the Anniversary client to support Resting).
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