I tried the same and I see the same behaviour when having "..\..\" in the path. If I change the working directory so I only have "..\" in the path, it seems to work as expected. I belive the root cause is the call to CPathUtils::GetLongPathname (TortoiseProc.cpp, line 356) which in turn calls GetFullPathName (a win32 api function). The last function returns both paths when called with "..\editor*..\server" but only the second when called with "..\..\editor*..\..\server".
I don't think it is reasonable to call GetLongPathname (and GetFullPathName) with the *-ed path, I think the could should be reorganized to separate the paths before calling GetLongPathname, however that requires some refactoring and I'm running out of time now. I will hopefully have some time tomorrow evening.
Kind regards
Daniel