Let S be an R algebra and a free R module, with basis c, and let T be an S algebra and a free S module, with basis b. Thus trace make sense in both S/R and T/S.
Cross multiply basis elements to find a basis for T as a free R module. Thus trace makes sense in T/R.
given an R endomorphism e on T, let M be the matrix over R that corresponds uniquely to e. Cut M up into blocks, like a checkerboard, where each block has size equal to the rank of S. Consider blocki,j. Multiply M by a vector v on the right, and this block is subjected to a slice of v, the slice that is built upon bj crossed with the basis c, having coefficients in R. The result is a slice of the output vector, the slice that is built upon bi crossed with the basis c, having coefficients in R. This defines, and is defined by, the ith projection of e(zbj), where z is the element of S determined by the slice of v. This block is really an R endomorphism on S.
At this point we need another assumption - e is an S module endomorphism. thus e respects addition and scaling by S. This is necessary if we are going to take the trace of e in T/S. Using the basis b, build a matrix P, with elements in S, that implements e. The entry Pi,j establishes the ith projection of e(zbj), where z is the coefficient (from S) on bj. Set z = 1 and Pi,j is the coefficient on bi of e(bj). Thus the i,j block in M implements multiplication by Pi,j in S.
The trace of e in T/S is the sum over the main diagonal of P. This is an element w in S, and multiplication by w is realized by adding up the diagonal blocks in M. The trace of w in S/R is the sum of these diagonal elements, but this in turn is the sum of all the diagonal elements of M. Therefore the trace of the trace is the trace.
Let P be a maximal ideal in R and localize about P. Since RP is a local ring, SP and TP become free RP modules. For notational convenience, I will refer to these rings as S T and R, as though localization had already taken place.
Let b be a basis for S over R. Let b have coefficients in P, rather than R, and find an R submodule H inside S. Multiply bi by an arbitrary x in H. Each bibj is a linear combination of basis elements, and this is multiplied by the coefficient on bj, which lies in P. The result lies in H. Put this all together and H is an ideal in S.
Raise H up to a maximal ideal Q in S. This contains the maximal ideal P in R. Since everything in R-P is a unit, Q lies over P. Localize again, with respect to Q, and R and S are both local rings. Now T becomes a free S module.
Start with an S module endomorphism e on T, and suppose the trace of the trace is not the trace. Equality is a local property, so find P in R such that these two values still disagree in RP. Localize about Q, and remember that trace and localization commute. Within our tower of free extensions, the trace of the trace is not the trace, and that is a contradiction. Therefore the trace of the trace is the trace, for any tower of finite flat extensions.