> It works fine with the 1.1 release. Am I wrong to consider this a bug?

Yes. According to 14.6.1, [temp.local]/4, your example is ill-formed:

>> A template­parameter shall not be redeclared within its scope
>> (including nested scopes). A template­parameter shall not have the
>> same name as the template name. [Example: 
>>  template<class T, int i>
>>  class Y { 
>>    int T; // error: template­parameter redeclared 
>>    void f()
>>    { char T; // error: template­parameter redeclared 
>>    } 
>>  };
>>  template<class X> class X; // error: template­parameter redeclared

Egcs 1.1 does not diagnose this rule, and assumes that the local
names hide the template parameters, instead.

Regards,
Martin