The following commands were 'sourced' with trace on, then followed by
a couple of manually entered commands. It shouldn't be too hard to
follow. Bottom line: the following script wrecks the wc if diff3
fails.

  svnadmin create d:/foo
  svn mkdir file:///d:/foo/a -m ""
  svn co file:///d:/foo/a
  cd a
  (echo a; echo b) > file.txt
  svn add file.txt
  svn ci -m "adds file for update testing"
  cd ..
  svn co file:///d:/foo/a b
  cd b
  (echo a; echo c) > file.txt
  svn ci -m "3rd party mod of file.txt"
  cd ../a
  (echo a; echo d) > file.txt
  svn st -u
  svn up



[D:/]$ . svn_bug_repro.sh
+ . svn_bug_repro.sh
+ svnadmin create d:/foo
+ svn mkdir file:///d:/foo/a -m

Committed revision 1.
+ svn co file:///d:/foo/a
Checked out revision 1.
+ cd a
+ echo a
+ echo b
+ svn add file.txt
A         file.txt
+ svn ci -m adds file for update testing
Adding         file.txt
Transmitting file data .
Committed revision 2.
+ cd ..
+ svn co file:///d:/foo/a b
A  b/file.txt
Checked out revision 2.
+ cd b
+ echo a
+ echo c
+ svn ci -m 3rd party mod of file.txt
Sending        file.txt
Transmitting file data .
Committed revision 3.
+ cd ../a
+ echo a
+ echo d
+ svn st -u
M      *        2   file.txt
Head revision:      3
+ svn up
svn: Problem running log
svn: in directory ''
svn: start_handler: error processing command 'merge' in ''
svn: Error calling external program
svn: svn_io_run_diff3: Error running d:/usr/local/wbin/diff3.exe:  exitcode was
2, args were:
in directory ., basenames:
file.txt.tmp
file.txt.tmp.tmp
file.txt.tmp.2.tmp
[D:/a]$ svn cleanup
+ svn cleanup
svn: Problem running log
svn: in directory ''
svn: start_handler: error processing command 'merge' in ''
svn: Error calling external program
svn: svn_io_run_diff3: Error running d:/usr/local/wbin/diff3.exe:  exitcode was
2, args were:
in directory ., basenames:
file.txt.3.tmp
file.txt.3.tmp.tmp
file.txt.3.tmp.2.tmp
*** At this point, go edit config not to use flakey diff3 ***
[D:/a]$ svn cleanup
+ svn cleanup
svn: Problem running log
svn: in directory ''
svn: start_handler: error processing command 'modify-entry' in ''
svn: error getting file affected time on `.svn/props/file.txt'
[D:/a]$