I can reproduce this:
$ ssh $remote_host remote$ bzr colo-init blech #make sure $HOME/blech doesn't exist on the local host remote$ exit $ bzr branch colo:bzr+ssh://$remote_host/Users/username/blech:trunk
gives
bzr: ERROR: Not a branch: "/Users/nmb/tmp/blech/.bzr/branches/trunk/".
I can reproduce this:
$ ssh $remote_host ssh://$ remote_ host/Users/ username/ blech:trunk
remote$ bzr colo-init blech
#make sure $HOME/blech doesn't exist on the local host
remote$ exit
$ bzr branch colo:bzr+
gives
bzr: ERROR: Not a branch: "/Users/ nmb/tmp/ blech/. bzr/branches/ trunk/" .