bug#3020: 23.0.92; `previous-line' sometimes fails with overlays

When I evaluate the following form in "emacs -Q":

   (progn
     (switch-to-buffer (get-buffer-create "test"))
     (insert "the first line\na ")
     (let ((o (make-overlay (point) (point))))
       (overlay-put
        o 'after-string
        (propertize (concat "very very very very very very very very "
                            "very very very very very very very very "
                            "long line") 'face '(:background "cyan"))))
     (insert "\nand the last line")
     (previous-line))

and then press C-p, point unexpectedly fails to move. However, when I
then press C-a C-n C-p C-p, the second C-p works as expected.


In GNU Emacs 23.0.92.1 (i386-apple-darwin9.6.1, GTK+ Version 2.14.7)
 of 2009-04-16 on mt-imac.local
Windowing system distributor `The X.Org Foundation', version 11.0.10402000
Important settings:
  value of $LC_ALL: nil
  value of $LC_COLLATE: nil
  value of $LC_CTYPE: nil
  value of $LC_MESSAGES: nil
  value of $LC_MONETARY: nil
  value of $LC_NUMERIC: nil
  value of $LC_TIME: nil
  value of $LANG: en.UTF-8
  value of $XMODIFIERS: nil
  locale-coding-system: utf-8-unix
  default-enable-multibyte-characters: t