Icon overlays not respecting directory hierarchy

I have installed TortoiseSVN v1.2.5 and noticed that the icon overlays do
not seem to be respecting the directory hierarchy.

I have tried refreshing (F5) in all the directories but it does not seem to
make a difference.

i.e..

Checkout a directory from SVN into dir1. After making a change to a file in
subdir1 the following icons are displayed.

dir1 (green tick) --> subdir1 (red exclamation mark) --> file (red
exclamation mark)

I would expect dir1 to also have a red exclamation mark like my previously
installed release v1.2.1

Have I misunderstood how the icons are displayed?

Please CC replies since I'm not on the mailing list.

Regards
Nick

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