Submodule status inside nested submodule fails

Hello there,

Using MSysGit 1.7.9 on Win7 (64 bit), I have a repo with the following 
structure:

main/
  src/
  ext/
    submodule/
       modules/module1
       modules/module2

submodule is... a submodule, having itself submodules.

When I query submodule status --recursive in main/, no problem.
But when I query submodule status in  ext/submodule, I get error "You need to
run this command from the toplevel of the working tree.", which is a wrong
error message.

Searching for message in git source I found the test triggering the message to
be an empty result for "git rev-parse --show-cdup". Running the command in
ext/submodule strangely returns the *absolute* path of ext/submodule, which
should not happen because this command returns path of current dir relative to
the containing working tree.

Is there something wrong with my repo? Or have I found a bug? Any help
appreciated

Charles