"Invalid editor anchoring" error during diff/merge

I believe that I have narrowed down the source of the problem I was
having last week with diff & merge in subversion 1.0.5, and it looks
like it's a problem with the handling of spaces in directory names in
the svn: protocol.

For example, if I run this command directly on the subversion server,
it succeeds:

svn diff -r 1226:1193
file:///Volumes/Bradbury/svnrepos/trunk/Projects/Life%20Balance

But if I run the equivalent command on the same repository from a
client machine, it fails:

svn diff -r 1226:1193 svn://whirlwind/trunk/Projects/Life%20Balance
svn: Invalid editor anchoring; at least one of the input paths is not a
directory and there was no source entry

If I do a diff directly on the Projects directory (leaving out
"/Life%20Balance"), it succeeds on both machines.

Attached is a csh script that reproduces the error. Edit the
repository variable at the top of the script to point to a writable
repository that uses the svn: protocol.

--Stuart A. Malone
   Llamagraphics, Inc.