This is indeed very strange. On my latest GHC 7 (built a couple of days ago) it does the right thing when compiled, but in GHCi it behaves as you describe. I have no idea, frankly.
Dear cafe,
does anyone have an explanation for this?:
>>> error (error "foo")
*** Exception: foo
>>> error $ error "foo"
*** Exception: *** Exception: foo
-- Steffen
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