Confirmed - same behaviour here (Debian 6.0.3, amd64, bzip2 1.0.5-6).
A - rough and hastily done - proof of concept exploiting the vulnerability: http://pastebin.com/FaaEsXRW
I can confirm that using the -T flag fixes this.Note that the security impact is probably quite low, as bzexe seems to be rarely used.
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