Ray, We've experienced exactly the same problem. We were trying to use a property of a folder to email errors to the appropriate person, but some (maybe all, I can't remember, John?) errors always resulted in the root folder's property being used rather than the property of the appropriate folder.
That's why I figured, perhaps, when looking for the 'badfile', the namespaces were searched all the way down the tree. When it didn't find it anywhere, it just printed the error message from where it ended up, which was at the root. Makes sense to me.. Course I'm not sure how it all really works internally.
This sounds entirely plausible. Can anyone from DC comment on this just so we know what's actually happening. This question has cropped up loads on the list but never with any real outcome... cheers, Chris