This is still an issue for me wtih 2.3.0~beta3-1ubuntu1:
ii  bzr                                        2.3.0~beta3-1ubuntu1                       easy to use distributed version control system

bzr branch lp:xyz
bzr: ERROR: exceptions.TypeError: readline() takes exactly 1 argument (2 given)

Traceback (most recent call last):
  File "/usr/lib/python2.7/dist-packages/bzrlib/commands.py", line 917, in exception_to_return_code
    return the_callable(*args, **kwargs)
  File "/usr/lib/python2.7/dist-packages/bzrlib/commands.py", line 1117, in run_bzr
    ret = run(*run_argv)
  File "/usr/lib/python2.7/dist-packages/bzrlib/commands.py", line 691, in run_argv_aliases
    return self.run(**all_cmd_args)
  File "/usr/lib/python2.7/dist-packages/bzrlib/commands.py", line 710, in run
    return self._operation.run_simple(*args, **kwargs)
  File "/usr/lib/python2.7/dist-packages/bzrlib/cleanup.py", line 135, in run_simple
    self.cleanups, self.func, *args, **kwargs)
  File "/usr/lib/python2.7/dist-packages/bzrlib/cleanup.py", line 165, in _do_with_cleanups
    result = func(*args, **kwargs)
  File "/usr/lib/python2.7/dist-packages/bzrlib/builtins.py", line 1185, in run
    from_location)
  File "/usr/lib/python2.7/dist-packages/bzrlib/bzrdir.py", line 806, in open_tree_or_branch
    bzrdir = klass.open(location)
  File "/usr/lib/python2.7/dist-packages/bzrlib/bzrdir.py", line 716, in open
    t = get_transport(base, possible_transports=possible_transports)
  File "/usr/lib/python2.7/dist-packages/bzrlib/lazy_import.py", line 128, in __call__
    return obj(*args, **kwargs)
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/__init__.py", line 1638, in get_transport
    return _get_transport(base, possible_transports)
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/__init__.py", line 1582, in _get_transport
    base = directories.dereference(base)
  File "/usr/lib/python2.7/dist-packages/bzrlib/directory_service.py", line 58, in dereference
    return service().look_up(name, url)
  File "/usr/lib/python2.7/dist-packages/bzrlib/plugins/launchpad/lp_directory.py", line 69, in look_up
    return self._resolve(url)
  File "/usr/lib/python2.7/dist-packages/bzrlib/plugins/launchpad/lp_directory.py", line 124, in _resolve
    result = resolve.submit(service)
  File "/usr/lib/python2.7/dist-packages/bzrlib/plugins/launchpad/lp_registration.py", line 272, in submit
    self._authenticated)
  File "/usr/lib/python2.7/dist-packages/bzrlib/plugins/launchpad/lp_registration.py", line 195, in send_request
    result = method(*method_params)
  File "/usr/lib/python2.7/xmlrpclib.py", line 1224, in __call__
    return self.__send(self.__name, args)
  File "/usr/lib/python2.7/xmlrpclib.py", line 1575, in __request
    verbose=self.__verbose
  File "/usr/lib/python2.7/dist-packages/bzrlib/plugins/launchpad/lp_registration.py", line 74, in request
    response = self._opener.open(request)
  File "/usr/lib/python2.7/urllib2.py", line 392, in open
    response = self._open(req, data)
  File "/usr/lib/python2.7/urllib2.py", line 410, in _open
    '_open', req)
  File "/usr/lib/python2.7/urllib2.py", line 370, in _call_chain
    result = func(*args)
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/http/_urllib2_wrappers.py", line 757, in https_open
    return self.do_open(HTTPSConnection, request)
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/http/_urllib2_wrappers.py", line 659, in do_open
    response = connection.getresponse()
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/http/_urllib2_wrappers.py", line 263, in getresponse
    self._response = httplib.HTTPConnection.getresponse(self)
  File "/usr/lib/python2.7/httplib.py", line 1027, in getresponse
    response.begin()
  File "/usr/lib/python2.7/dist-packages/bzrlib/transport/http/_urllib2_wrappers.py", line 184, in begin
    httplib.HTTPResponse.begin(self)
  File "/usr/lib/python2.7/httplib.py", line 439, in begin
    self.msg = HTTPMessage(self.fp, 0)
  File "/usr/lib/python2.7/mimetools.py", line 25, in __init__
    rfc822.Message.__init__(self, fp, seekable)
  File "/usr/lib/python2.7/rfc822.py", line 108, in __init__
    self.readheaders()
  File "/usr/lib/python2.7/httplib.py", line 280, in readheaders
    line = self.fp.readline(_MAXLINE + 1)
TypeError: readline() takes exactly 1 argument (2 given)