But that's just a product of IE's c**p (oops, sorry, "poor") error
handling and it's "poor" DOM handling. Your example behaves the same
way in IE6.
"Failed" is the message generated by attempting to manipulate the DOM
invalidly (like before it's completely defined). It wouldn't surprise
me if the way IE handles a "change" is to remove the element from the
DOM and replace it with the new version; and the way the resultant
event is handled doesn't fit into that strategy. Or something. That
means that while what IE does may be unorthodox, the current behaviour
hasn't changed since IE6 and so should not be unexpected; and it means
that jQuery should code for it and not cause a "Failed" error. So I
reckon it *is* an issue with .live() and that's where it should be
reported.