Cut lamb from bones, reserving bones, then cut meat into 1-inch pieces.
Heat 1/2 tablespoon oil in a flameproof wide shallow casserole with a tight-fitting lid over moderately high heat until hot but not smoking. Brown meat on all sides in 2 batches, transferring to a plate as browned. Brown bones and transfer to plate.
Add remaining 1/2 tablespoon oil to the casserole and cook onion, stirring, until softened. Return meat and bones to pot. Stir in water, saffron, salt, and pepper and bring to a boil. Reduce heat and simmer mixture, covered, stirring occasionally, until lamb is tender, about 1 1/4 hours.
Transfer the lamb to a clean plate and add any meat from lamb bones, discarding bones. Add carrots and sweet potato to pot, then simmer, covered, stirring occasionally, until vegetables are barely tender, about 10 minutes.
Add ginger, cinnamon, prunes, apricots, and squash, simmer, covered, stirring occasionally, until vegetables and fruits are tender, about 5 minutes. Return lamb to stew and add honey. Season with salt, pepper, and nutmeg and simmer, uncovered, stirring occasionally, 5 minutes.