I have found a workaround: branching from the repository without the use of the colo extension for the source works just fine, for example the following sequence of commands works just fine (output omitted for clarity):

$ bzr colo-init alltray
$ cd alltray
$ bzr branch bzr+ssh://aloe.trausch.us/home/mbt/Projects/desktop/alltray/.bzr/branches/origin/trunk colo:origin/trunk

Also, the following single command works in the same way:

$ bzr colo-fetch bzr+ssh://aloe.trausch.us/home/mbt/Projects/desktop/alltray/.bzr/branches/origin/trunk alltray

The only problem comes when using the colo: specifier to branch from the source on the remote system, such as:

$ bzr colo-fetch colo:bzr+ssh://aloe.trausch.us/home/mbt/Projects/desktop/alltray:origin/trunk alltray

This is the output that is placed in ~/.bzr.log for the execution of the previous command:

Sat 2011-04-23 22:09:58 -0400
1.029  bazaar version: 2.3.0
1.029  bzr arguments: [u'colo-fetch', u'bzr+ssh://aloe.trausch.us/home/mbt/Projects/desktop/alltray:origin/trunk', u'alltray']
1.419  looking for plugins in /Users/mbt/.bazaar/plugins
1.439  looking for plugins in /Library/Python/2.6/site-packages/bzrlib/plugins
3.888  encoding stdout as sys.stdout encoding 'UTF-8'
4.196  creating repository in file:///Users/mbt/Projects/client/alltray/.bzr/branches/.bzr/.
4.206  creating branch <bzrlib.branch.BzrBranchFormat7 object at 0x1024bfc90> in file:///Users/mbt/Projects/client/alltray/.bzr/branches/origin/trunk/
4.270  creating branch reference in file:///Users/mbt/Projects/client/alltray/
4.329  trying to create missing lock '/Users/mbt/Projects/client/alltray/.bzr/checkout/dirstate'
4.329  opening working tree '/Users/mbt/Projects/client/alltray'
4.383  opening working tree '/Users/mbt/Projects/client/alltray'
5.074  ssh implementation is OpenSSH
10.866  bzr-svn: using Subversion 1.6.15 (), Subversion API 1.6.5 (), subvertpy 0.7.5
11.017  Traceback (most recent call last):
  File "/Library/Python/2.6/site-packages/bzrlib/commands.py", line 923, in exception_to_return_code
    return the_callable(*args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/commands.py", line 1123, in run_bzr
    ret = run(*run_argv)
  File "/Library/Python/2.6/site-packages/bzrlib/commands.py", line 691, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/Library/Python/2.6/site-packages/bzrlib/commands.py", line 710, in run
    return self._operation.run_simple(*args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/cleanup.py", line 135, in run_simple
    self.cleanups, self.func, *args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/cleanup.py", line 165, in _do_with_cleanups
    result = func(*args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/plugins/colo/commands.py", line 278, in run
    remember=True)
  File "/Library/Python/2.6/site-packages/bzrlib/commands.py", line 710, in run
    return self._operation.run_simple(*args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/cleanup.py", line 135, in run_simple
    self.cleanups, self.func, *args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/cleanup.py", line 165, in _do_with_cleanups
    result = func(*args, **kwargs)
  File "/Library/Python/2.6/site-packages/bzrlib/builtins.py", line 991, in run
    possible_transports=possible_transports)
  File "/Library/Python/2.6/site-packages/bzrlib/branch.py", line 176, in open
    possible_transports=possible_transports)
  File "/Library/Python/2.6/site-packages/bzrlib/bzrdir.py", line 717, in open
    return BzrDir.open_from_transport(t, _unsupported=_unsupported)
  File "/Library/Python/2.6/site-packages/bzrlib/bzrdir.py", line 752, in open_from_transport
    return format.open(transport, _found=True)
  File "/Library/Python/2.6/site-packages/bzrlib/bzrdir.py", line 1699, in open
    return self._open(transport)
  File "/Library/Python/2.6/site-packages/bzrlib/bzrdir.py", line 2886, in _open
    return remote.RemoteBzrDir(transport, self)
  File "/Library/Python/2.6/site-packages/bzrlib/remote.py", line 120, in __init__
    self._probe_bzrdir()
  File "/Library/Python/2.6/site-packages/bzrlib/remote.py", line 132, in _probe_bzrdir
    self._rpc_open_2_1(path)
  File "/Library/Python/2.6/site-packages/bzrlib/remote.py", line 141, in _rpc_open_2_1
    raise errors.NotBranchError(path=self.root_transport.base)
NotBranchError: Not a branch: "bzr+ssh://aloe.trausch.us/home/mbt/Projects/desktop/alltray%3Aorigin/trunk/".

11.018  Transferred: 0kB (0.0kB/s r:0kB w:0kB)
11.018  return code 3