eclipse:eclipse creates a .classpath containing the M2_REPO variable followed by the expanded value of the variable

Using maven 2.0.8, and eclipse plugin (version 2.4 or 2.5). When I run mvn eclipse:eclipse the .classpath that gets generated is invalid. My M2_REPO variable is set to /var/maven and the classpath entries for dependencies look like :
<classpathentry kind="var" path="M2_REPO/var/maven/commons-collections/commons-collections/3.1/commons-collections-3.1.jar"/>
where
<classpathentry kind="var" path="M2_REPO/commons-collections/commons-collections/3.1/commons-collections-3.1.jar"/>
would be the correct entry.

Things about my environment that may be affecting this:

• I run maven from a cygwin bash prompt.
• /var/maven is a symlink to /cygdrive/c/var/maven
• MAVEN_HOME is C:\opt\maven-2.0.8

settings.xml and pom.xml for the affected project is included. It should be noted that some other projects on the same machine seem to work fine, but others dont. I don't see any