I reported this upstream:
http://groups.google.com/group/gnu.bash.bug/browse_frm/thread/5dfc835402338e1a
I can confirm that this is fixed in Karmic (bash 4.0-5ubuntu2).
** Changed in: bash (Ubuntu)
Status: Confirmed => Fix Released
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bash completion double escapes
https://bugs.launchpad.net/bugs/247838
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