Permission denied if repository resides in a subdirectory

The following error is thrown when repositories are created in subdirectories:
$ bzr branch bzr+ssh://bzr@myserver/test/testbranch
bzr: ERROR: Server sent an unexpected error: ('error', 'Permission denied: "test": You do not have read access for this repository.')

The bazitis.conf file looks like this:
[bazitis]

[group bazitis-admin]
writable = bazitis-admin
members = admin

[group test]
writable = test/testbranch
members = user1

The path is getting split by os.path.sep on line 66 of bazplugin.py which prevents bazaar from seeing anything beyond the first '/'.

I was able to get it to work by replacing line 66 with this:
b = path.find(os.sep+'.bzr')

Patch is attached