bug#3250: 23.0.93; tab completion flakey with tramp when insert-default-directory is nil

With the following in my .emacs:

(setq insert-default-directory nil)

tab completion when using tramp to access a remote file becomes flakey.
It seems that the notion of the current working directory becomes lost,
so tab completion ends up with doubled up directories, eg:

/home/chris/afolder/afolder

...where afolder doesn't exist, resulting in errors such as the following:

File error: tramp-handle-file-name-all-completions: Couldn't `cd 
/home/chris/afolder/afolder/'

This doesn't happen right away, but I usually end up bumping into it 
when navigating
around a folder structure by inserting .. a number of times in the 
minibuffer window.

In GNU Emacs 23.0.93.1 (i386-mingw-nt5.1.2600)
  of 2009-05-02 on SOFT-MJASON
Windowing system distributor `Microsoft Corp.', version 5.1.2600
configured using `configure --with-gcc (3.4)'

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: ENG
   value of $XMODIFIERS: nil
   locale-coding-system: cp1252
   default-enable-multibyte-characters: t

Major mode: GNUmakefile

Minor modes in effect:
   shell-dirtrack-mode: t
   cua-mode: t
   tooltip-mode: t
   mouse-wheel-mode: t
   menu-bar-mode: t
   file-name-shadow-mode: t
   global-font-lock-mode: t
   font-lock-mode: t
   blink-cursor-mode: t
   global-auto-composition-mode: t
   auto-composition-mode: t
   auto-encryption-mode: t
   auto-compression-mode: t
   line-number-mode: t
   transient-mark-mode: t

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