Fix has been committed to:
	gdb-6.6-scheduler_locking-step-sw-watchpoints2.patch

--- /dev/null	2007-12-14 20:45:09.113039517 +0100
+++ gdb-6.5/gdb/testsuite/gdb.base/watchpoint-during-step.exp	2007-12-24 19:42:00.000000000 +0100
@@ -0,0 +1,44 @@
+# Copyright 2007 Free Software Foundation, Inc.
+
+# This program is free software; you can redistribute it and/or modify
+# it under the terms of the GNU General Public License as published by
+# the Free Software Foundation; either version 2 of the License, or
+# (at your option) any later version.
+# 
+# This program is distributed in the hope that it will be useful,
+# but WITHOUT ANY WARRANTY; without even the implied warranty of
+# MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+# GNU General Public License for more details.
+# 
+# You should have received a copy of the GNU General Public License
+# along with this program; if not, write to the Free Software
+# Foundation, Inc., 59 Temple Place - Suite 330, Boston, MA 02111-1307, USA.  
+
+set testfile watchpoint-during-step
+set srcfile ${testfile}.c
+set binfile ${objdir}/${subdir}/${testfile}
+if  { [gdb_compile "${srcdir}/${subdir}/${srcfile}" "${binfile}" executable {debug}] != "" } {
+    untested "Couldn't compile test program"
+    return -1
+}
+
+# Get things started.
+
+gdb_exit
+gdb_start
+gdb_reinitialize_dir $srcdir/$subdir
+gdb_load ${binfile}
+
+runto_main
+
+gdb_breakpoint [gdb_get_line_number "var = 2"]
+gdb_continue_to_breakpoint "Find the first var set"
+
+gdb_test "step" ".*var = 3;" "Step to the next var set"
+
+gdb_test "watch var" "atchpoint .*: var" "Set the watchpoint"
+
+# Here is the target point.  Be careful to not have breakpoint set on the line
+# we step from as in this case it is a valid upstream KFAIL gdb/38
+
+gdb_test "step" ".*Old value = 2.*New value = 3.*" "Catch the watchpoint"
--- /dev/null	2007-12-14 20:45:09.113039517 +0100
+++ gdb-6.5/gdb/testsuite/gdb.base/watchpoint-during-step.c	2007-12-24 19:38:10.000000000 +0100
@@ -0,0 +1,30 @@
+/* This testcase is part of GDB, the GNU debugger.
+
+   Copyright 2007 Free Software Foundation, Inc.
+
+   This program is free software; you can redistribute it and/or modify
+   it under the terms of the GNU General Public License as published by
+   the Free Software Foundation; either version 2 of the License, or
+   (at your option) any later version.
+
+   This program is distributed in the hope that it will be useful,
+   but WITHOUT ANY WARRANTY; without even the implied warranty of
+   MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
+   GNU General Public License for more details.
+ 
+   You should have received a copy of the GNU General Public License
+   along with this program; if not, write to the Free Software
+   Foundation, Inc., 59 Temple Place - Suite 330, Boston, MA 02111-1307, USA.
+
+   Please email any bugs, comments, and/or additions to this file to:
+   bug-gdb@prep.ai.mit.edu  */
+
+static int var;
+
+int main()
+{
+  var = 1;
+  var = 2;
+  var = 3;
+  return 0;
+}