> Bug confirmed.  My test page below.  Three identical
> links, first one will correctly be external while
> following two will change to a heap of '../'s

Forgot to mention it appears to be related to the "Test all URLs option" (-t). 
By removing that option the bug disappears.

Works:

httrack <http://www.kauler.com/misc/httrack-test-repeatexternal.htm> -O "c:/my
web sites/test repeat" -xnK0Da

Fails:

httrack <http://www.kauler.com/misc/httrack-test-repeatexternal.htm> -O "c:/my
web sites/test repeat" -xtnK0Da