Major Description
There is a regression test for this already, see merge_tests.py 5.
The first part of the test runs merge with an explicit wc target, and
that works fine. The second part tries the same merge, but inside the
directory where the target lives, and without naming the target. That
fails, over all RA layers:
$ cd working_copies/merge_tests_5/A/D/G/
$ svn merge -r 1:2 schema://blah/repositories/merge_tests-5/A/D/G/rho
[insert appropriate error here]
See merge_tests.py 5 for more details.