Linnets hit rock bottom after looking good for at least a point for most of the game.
It was an unhappy return for many Lynn players including manager Gary Mills, who revisited a club he played seven league games for at the start of the season.
After David Puttnam scored against his former club and Lee Wilson spurned an early second half chance to make it 2-0, Linnets were dealt two hammer blows from 19 year-old Moatman Ashley Brown, who notched his first senior goals.
Further bad news was that basement boys Dorchester won, which left Lynn firmly rooted to the bottom of the table instead.
Puttnam made it only Lynn's third goal in eight matches and during that barren spell only Wilson has been on target. Leo Cotterell said before the match that he'd stand behind the Rovers goal as it's the safest place in the ground. As long as their inability to kill off matches continues, a relegation battle will loom for Lynn.
Assistant manager Darren Gee agreed: "We cannot have 60 to 70 per cent of the game and not win - it's a major concern," he said. "We're just not killing them off. We've got to sustain what we're doing in 45 minutes to the full 90.
"I thought we had four or five good chances and if Lee Wilson had scored in the second half we'd have been two up. But Lee will score goals for us.
"We're making basic errors when we're comfortable. Chuck (Martini) had one save to make in 70 minutes."
Moatmen boss Garry Birtles would have settled for a point at half-time and backed his friend Mills who he's known for 20 years.
“We scored with our only two bits of quality and I would have settled for 1-1," said Birtles “I'm sure Gary will pull it around he's got a good, experienced side!”
Mills added: "I just shook Garry's hand. It's not a time for reminiscing, it's all about now."
"I'm gutted," was his reaction to the result. “We dominated the game but came away without the three points. We were the better side, we threw away all our hard work.
“We can't give away two goals at the far post, we just switched off."
Other ex-Gresley players on view were Craig Clark, who had a fine game, and Steve McGinty.
Lynn had an early escape when Graeme Fowkes' corner skimmed off Paul Ramsey's head and hit the near post. McGinty was causing problems down the left, Matt Carvell heading towards his own net before Rob Smith nodded off the line.
Then Micky Nuttell knocked down another McGinty centre and keeper Stuart Ford saved at Wilson's feet. Lynn's strident penalty appeals were turned down when Dave Faulkner seemed to shove Wilson on the edge of the box.
Linnets got their reward when Richard Follett sent in a free-kick to Wilson. He let it run to the unmarked Puttnam, who drilled in for a dream return to the Moat Ground. Just before half-time Martini made a stunning leaping save to deny Brown's 35-yard drive.
Thirty seconds after the restart came the turning point of the match as Wilson dribbled past sub Paul Fitzpatrick and shot just wide. On the hour Rovers levelled as Brown headed Wardle's left-wing cross past Martini.
Another Brown 30-yard effort hit the upright but he soon made amends. lan Pitt's quick free-kick fed Smith and another cross from the left eluded the previously sound Lynn defence, finding Brown who beat McGinty before slotting in past Tony Spearing's despairing dive on the line.
Wilson's persistence carved out another opportunity but he shot a foot wide. During the last quarter Mills threw on all three substitutes in an attempt to draw level. Puttnarn had another shot deflected, Glen Fuff's effort was blocked in a crowded Gresley area and Clark directed a weak header to the keeper
The game ended with some disaffected Lynn fans chanting 'Scales out' in reference to the Linnets chairman.
Gee said that some new faces could be seen at The Walks this week but he and Mills have given up on signing Brett McNamara from Kettering.
"You look at the first half and we don't need any new players. We've gone bottom but we're still confident in our ability. We still haven't seen anyone outplay us."
However their plight only underlines how Linnets desperately need a proven goalscorer like McNamara.
Lynn: Martini, Follett, McGinty (Sterling 81), Fuff, Clark, Spearing, Hoyle (Mills 85), Ramsey, Nuttell (Palmer 78), Puttnam, Wilson.
Gresley: Ford, Brown, Kearns (Fitzpatrick 45), Carvekk, Faulkner, Smith, Simpson (Orton 29), Wardle, Pitt, Rowland, Fowkes. Subs (not used) Sandar.