In a nutshell:
When adding quantity greater than what is available in stock (while fancy purchase notifications are turned on) the buyer is informed that there isn't enough stock available, while also given the current number available. When the number is changed to the number given as actual available stock, the cart seems to retain a single item from the previous attempt and a new message is given with a current available stock of one less than before.
I add a quantity of "10" widgets to my cart. A nice little note pops up, apologizing while informing that there are indeed only 5 widgets available. My cart appears to remain empty (as nothing seemed to be added). I promptly change my quantity to "5". A nice little note pops up to tell me that there are only 4 widgets available. This cycle of decreasing available widget stock by one with each attempt will continue until there are no widgets in the cart or even in stock.
Manually emptying the cart does not take care of the problem. The stock does seem to return to normal after the allotted time has passed (i.e. whatever time period "keep stock in cart for" is set to).
This has been tested both live and on a local host, so its not like we are competing with live buyers for cart stock in real time.
Tracing back, the last version of wp ecommerce where this is not an issue is 220.127.116.11, which happens to be the one we are limited to until this gets fixed.