It certainly isn't supposed to force all test runs to be interactive :-(
Have you tried removing SVN_USE_WIN32_CRASHHANDLER from gen_win.py?
Johan Corveleyn wrote on Mon, Jan 24, 2011 at 02:42:11 +0100:
> Hi,
>
> Already for some time now, update_tests.py 58 (XFAIL: update a
> nonexistent child of a copied dir) crashes on my machine:
>
> svn: In file '..\..\..\subversion\libsvn_wc\update_editor.c' line
> 4877: assertion failed (repos_root != NULL && repos_uuid != NULL)
>
> I understand that this test is XFAIL, that this isn't addressed yet,
> but is it supposed to fail an assert?
>
> On my system (Win XP) this causes an ugly popup to appear (which I
> need to click away to continue), each time I run the full test suite
> ("This application has requested the Runtime to terminate it in an
> unusual way...")
>
> Relevant excerpt from tests.log in attachment (this was with trunk@1062600).
>
> Cheers,
> --
> Johan