I'm not sure, but I think you need to use labels, rather than flet, in this case, since local functions defined using flet cannot be recursive. At least that's how I interpret what it says on page 319.

At any rate, this solution works using labels:

  (defmacro ntimes (n &rest body)
      (let ((h (gensym))
            (g (gensym)))
        `(let ((,h ,n))
           (labels ((ntimes-local (,g) 
                    (if (> ,g 0) 
                        ,@body)
                    (if (zerop ,g)
                        nil
                        (ntimes-local (1- ,g)))))
             (ntimes-local ,h)))))

(Sorry, but again I don't know how to preserve the formatting of my code in this newsgroup.)