System.Transactions / SqlClient Bug?

Hi,
I've been doing some work with nested TransactionScope classes and timeouts and I'm getting some strange results that I can't quite explain.  I'm hoping that I've done something foolish in my code, since that will be by far the easiest fix :)
The scenario is that I have a stored procedure that may block indefinately (arguably not great, but it's outside of my control) - in the example below, it does a simple "waitfor" to pause for 3 seconds.  There is a intermediate data layer between my application code and the database that wraps all database calls in a TransactionScope (essentially the ExecCommand method in the example).  At the application layer, we create a TransactionScope with a timeout, then call into the data layer to perform the query (the application layer is the Main method in the example).
The behaviour I'm seeing is that the initial call will block within SQL Server until the current executing SQL command completes (in this case, the waitfor).  At that point, the batch is terminated and control returns to the C#.  Within the C# there are no errors until the outer TransactionScope is disposed; the only apparent way of detecting that the batch didn't complete is to examine the Transaction.Current.TransactionInformation.Status property.  I can just about live with that (although would have prefered that the ExecuteNonQuery had thrown); the example checks this status property and throws an exception if it's bad.
So far, so good.  It all goes very wrong if I attempt to make another call.  If the connection has the "connection reset" property set to false, then the second call fails immediately with a "transaction in doubt" error.  If the "connection reset" property is set to true, then the second call completes successfully, except the database doesn't get called! (In profiler, you see the exec os sp_reset_connection, but that's all).  It all looks as if I've not tidied up properly, but I'm not sure what I've missed.  To add some spice, putting a 1 second sleep before the Execute makes everything work as expected.
The sample code is below; sorry if it's a little large.  There a connection string right at the top that you may need to tweak.  It creates a stored procedure in the initial catalog; see line 95 for details - it's nothing offensive!  The sample compiles just fine from the command line with no special options needed.
Finally, I'm running .Net v2.0.50727 and the Sept. CTP of SQL Server 2005.
Here's hoping someone can tell me what I've done wrong!
Cheers,
Steve
using System;