AssertionErorr "name .. already in parent" during _generate_inventory

Repository Originally created with bzr rev 1.15-1. Currently at rev 2.0.3-2.
Windows version.
This is the error seen when trying to update the local branch.
I cannot use update or revert on this branch without it crashing.

Here is the bzr status output:

C:\ProjectName>bzr status
working tree is out of date, run 'bzr update'
removed:
  .bzrignore
modified:
  file123.py
unknown:
  file456.log

Here is the bzr update output:

C:\ProjectName>bzr update
bzr: ERROR: exceptions.AssertionError: name u'.bzrignore' already in parent

Traceback (most recent call last):
  File "bzrlib\commands.pyo", line 842, in exception_to_return_code
  File "bzrlib\commands.pyo", line 1037, in run_bzr
  File "bzrlib\commands.pyo", line 654, in run_argv_aliases
  File "bzrlib\builtins.pyo", line 1413, in run
  File "bzrlib\workingtree.pyo", line 2216, in update
  File "bzrlib\mutabletree.pyo", line 53, in tree_write_locked
  File "bzrlib\workingtree.pyo", line 2256, in _update_tree
  File "bzrlib\merge.pyo", line 1567, in merge_inner
  File "bzrlib\merge.pyo", line 508, in do_merge
  File "bzrlib\merge.pyo", line 480, in _do_merge_to
  File "bzrlib\merge.pyo", line 620, in do_merge
  File "bzrlib\merge.pyo", line 652, in _compute_transform
  File "bzrlib\merge.pyo", line 702, in _entries3
  File "bzrlib\decorators.pyo", line 138, in read_locked
  File "bzrlib\tree.pyo", line 201, in iter_entries_by_dir
  File "bzrlib\workingtree_4.pyo", line 401, in _get_inventory
  File "bzrlib\workingtree_4.pyo", line 337, in _generate_inventory
AssertionError: name u'.bzrignore' already in parent

bzr 2.0.3 on python 2.5.4 (Windows-XP-5.1.2600-SP3)
arguments: ['bzr', 'update']
encoding: 'cp1252', fsenc: 'mbcs', lang: None
plugins:
  bzrtools C:\Program Files\Bazaar\plugins\bzrtools [2.0.1]
  explorer C:\Program Files\Bazaar\plugins\explorer [0.8.3]
  launchpad C:\Program Files\Bazaar\plugins\launchpad [2.0.3]
  netrc_credential_store C:\Program Files\Bazaar\plugins\netrc_credential_store
[2.0.3]
  qbzr C:\Program Files\Bazaar\plugins\qbzr [0.14.5]
  rebase C:\Program Files\Bazaar\plugins\rebase [0.5.4]
  svn C:\Program Files\Bazaar\plugins\svn [1.0.0]
  upload C:\Program Files\Bazaar\plugins\upload [1.0.0dev]
  xmloutput C:\Program Files\Bazaar\plugins\xmloutput [0.8.5]

*** Bazaar has encountered an internal error. This probably indicates a
    bug in Bazaar. You can help us fix it by filing a bug report at
        https://bugs.launchpad.net/bzr/+filebug
    including this traceback and a description of the problem.

Here is the bzr revert output:

C:\ProjectName>bzr revert
bzr: ERROR: exceptions.AssertionError: name u'.bzrignore' already in parent

Traceback (most recent call last):
  File "bzrlib\commands.pyo", line 842, in exception_to_return_code
  File "bzrlib\commands.pyo", line 1037, in run_bzr
  File "bzrlib\commands.pyo", line 654, in run_argv_aliases
  File "bzrlib\builtins.pyo", line 4053, in run
  File "bzrlib\builtins.pyo", line 4063, in _revert_tree_to_revision
  File "bzrlib\mutabletree.pyo", line 53, in tree_write_locked
  File "bzrlib\workingtree.pyo", line 2067, in revert
  File "bzrlib\transform.pyo", line 2510, in revert
  File "bzrlib\transform.pyo", line 2534, in _prepare_revert_transform
  File "bzrlib\decorators.pyo", line 138, in read_locked
  File "bzrlib\workingtree.pyo", line 973, in merge_modified
  File "bzrlib\workingtree_4.pyo", line 401, in _get_inventory
  File "bzrlib\workingtree_4.pyo", line 337, in _generate_inventory
AssertionError: name u'.bzrignore' already in parent

bzr 2.0.3 on python 2.5.4 (Windows-XP-5.1.2600-SP3)
arguments: ['bzr', 'revert']
encoding: 'cp1252', fsenc: 'mbcs', lang: None
plugins:
  bzrtools C:\Program Files\Bazaar\plugins\bzrtools [2.0.1]
  explorer C:\Program Files\Bazaar\plugins\explorer [0.8.3]
  launchpad C:\Program Files\Bazaar\plugins\launchpad [2.0.3]
  netrc_credential_store C:\Program Files\Bazaar\plugins\netrc_credential_store
[2.0.3]
  qbzr C:\Program Files\Bazaar\plugins\qbzr [0.14.5]
  rebase C:\Program Files\Bazaar\plugins\rebase [0.5.4]
  svn C:\Program Files\Bazaar\plugins\svn [1.0.0]
  upload C:\Program Files\Bazaar\plugins\upload [1.0.0dev]
  xmloutput C:\Program Files\Bazaar\plugins\xmloutput [0.8.5]

*** Bazaar has encountered an internal error. This probably indicates a
    bug in Bazaar. You can help us fix it by filing a bug report at
        https://bugs.launchpad.net/bzr/+filebug
    including this traceback and a description of the problem.