If I replace the lines:
bzr branch ../hosta/project/ one
bzr branch ../hosta/project/ two
with something that uses the bzr+ssh transport instead, such as:
bzr branch bzr+ssh://localhost/~/bzrtest/hosta/project/ one
bzr branch bzr+ssh://localhost/~/bzrtest/hosta/project/ two
Then the error changes to:
bzr: ERROR: No such file: u'/home/exarkun/bzrtest/hostb/.bzr/repository/indices/a2c8bdbf13d1c0d81330863f2d3d2657.six': [Errno 2] No such file or directory: u'/home/exarkun/bzrtest/hostb/.bzr/repository/indices/a2c8bdbf13d1c0d81330863f2d3d2657.six'
Associated .bzr.log portion attached.