REGRESSION: removal of "rvalue conversion" causes problems

FULL PRODUCT VERSION :
java version "1.6.0-beta2"
Java(TM) 2 Runtime Environment, Standard Edition (build 1.6.0-beta2-b73)
Java HotSpot(TM) Client VM (build 1.6.0-beta2-b73, mixed mode, sharing)

ADDITIONAL OS VERSION INFORMATION :
Microsoft Windows XP [Version 5.1.2600]

A DESCRIPTION OF THE PROBLEM :
When I test my code with 1.6.0-beta2-b73, a new compiler error was introduced to my code.
####
import java.util.Iterator;
import java.util.List;

public class GenericsTest<A> {
  
  interface Factory<T> {
    T invoke();
  }

  public static <E> Iterator<E> iterate(Iterable<E> iterable) {
    return iterable.iterator();
  }

  public Factory<Iterator<? extends A>> factory(final Factory<? extends List<? extends A>> factory) {
    return new Factory<Iterator<? extends A>>() {
      public Iterator<? extends A> invoke() {
        return iterate(factory.invoke());
      }
    };
  }
}
####
Removing one of the '? extends ...' parts in the declaration of the parameter factory
  public Factory<Iterator<? extends A>> factory(final Factory<List<? extends A>> factory)
or
  public Factory<Iterator<? extends A>> factory(final Factory<? extends
List<A>> factory)
or calling the iterator method directly on the generated object
  return factory.invoke().iterator();
causes 1.6.0-beta2-b73 to remove the error.

STEPS TO FOLLOW TO REPRODUCE THE PROBLEM :
Simply try to compile the specified code.

EXPECTED VERSUS ACTUAL BEHAVIOR :
EXPECTED -
The code should be compiled without errors.
ACTUAL -
The code produces the specified error.

ERROR MESSAGES/STACK TRACES THAT OCCUR :
Test.java:17: <E>iterate(java.lang.Iterable<E>) in Test<A> cannot be applied to
(capture#276 of ? extends java.util.List<? extends A>)
        return iterate(factory.invoke());
               ^
1 error

REPRODUCIBILITY :
This bug can be reproduced always.

---------- BEGIN SOURCE ----------
import java.util.Iterator;
import java.util.List;

public class GenericsTest<A> {
  
  interface Factory<T> {
    T invoke();
  }

  public static <E> Iterator<E> iterate(Iterable<E> iterable) {
    return iterable.iterator();
  }

  public Factory<Iterator<? extends A>> factory(final Factory<? extends List<? extends A>> factory) {
    return new Factory<Iterator<? extends A>>() {
      public Iterator<? extends A> invoke() {
        return iterate(factory.invoke());
      }
    };
  }
}

---------- END SOURCE ----------

CUSTOMER SUBMITTED WORKAROUND :
Removing one of the '? extends ...' parts in the declaration of the parameter factory
  public Factory<Iterator<? extends A>> factory(final Factory<List<? extends A>> factory)
or
  public Factory<Iterator<? extends A>> factory(final Factory<? extends
List<A>> factory)
or calling the iterator method directly on the generated object
  return factory.invoke().iterator();
causes 1.6.0-beta2-b73 to remove the error.

Release Regression From : 5.0
The above release value was the last known release where this
bug was known to work. Since then there has been a regression.