bug#5078: 23.1.50; vc broken

Please describe exactly what actions triggered the bug
and the precise symptoms of the bug.  If you can, give
a recipe starting from `emacs -Q':

For files that are placed in a subdirectory (where there's no .git) of a
git repo, vc now thinks a file unchanged even if there are changes.

If Emacs crashed, and you have the Emacs process in the gdb debugger,
please include the output from the following gdb commands:
    `bt full' and `xbacktrace'.
For information about debugging Emacs, please read the file
/Applications/Emacs.app/Contents/Resources/etc/DEBUG.


In GNU Emacs 23.1.50.1 (i386-apple-darwin9.8.0, NS apple-appkit-949.54)
 of 2009-11-27 on victoria.local
Windowing system distributor `Apple', version 10.3.949
configured using `configure  '--with-ns''

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