Shared Roster move bug

I ran into a problem at our site that I think is a very large problem with shared rosters.
When a user moves a contact from a shared roster group, The user is now appears as "undefined" in the contacts roster.
Example:
Bob is a member of shared groups ONE and THREE, and Sue is a member of shared groups ONE and TWO.
Logging in Bob shows Sue in shared groups ONE and TWO, and Sue shows Bob in shared groups ONE and THREE
Bob move Sue from shared group ONE to shared group THREE.
At this point an update to Sue's client shows Bob in Sue's roster as "undefined".

I have tested this with several clients always with the same results.
First off why would anything Bob does affect Sue's roster? Why is bob now undefined for Sue when from the server admin web it still shows bob in shared groups ONE and THREE?

Second, is or has anyone else seen this behavior?
We are running Ubuntu 6.0.6 Dapper with Ejabberd 2.1.3 but have test and gotten the same results on 2.0.5

here is the client xml :
here is the stanza from user doing the move:
OUT(1,bob@car-parts.com/tkabber):
THREETWO
IN(1,bob@car-parts.com/tkabber):
THREE
OUT(1,bob@car-parts.com/tkabber):

This is what the user being moved received:

IN(1,sue@car-parts.com/tkabber):

OUT(1,sue@car-parts.com/tkabber):

OUT(1,sue@car-parts.com/tkabber):

OUT(1,sue@car-parts.com/tkabber):