T-SQL (SS2K8) :: Inline Table-valued Function - A Severe Error Occurred

I'm attempting to convert some INSERT-EXEC structures into table-valued functions because the procedures are deeply nested and INSERT-EXEC doesn't like nesting (Error 3915: Cannot use the ROLLBACK statement within an INSERT-EXEC statement)

The procedure has a single select statement, so I created an inline table-valued function. When I ran it with sample data, I received this error (yes, twice):

Msg 0, Level 11, State 0, Line 0
A severe error occurred on the current command. The results, if any, should be discarded.
Msg 0, Level 20, State 0, Line 0
A severe error occurred on the current command. The results, if any, should be discarded.

After ruling out obvious mistakes, I started to deconstruct the select statement with its CTE and TVP. The result is the following, built in my local sandbox database:

CREATE TYPE test_list AS TABLE(a int);
GO
CREATE FUNCTION test_function (@p int, @theTable test_list READONLY)
RETURNS TABLE
AS
RETURN (
WITH cte
AS (SELECT a FROM @theTable)
SELECT cte.a
FROM cte);
GO
DECLARE @t test_list;
INSERT @t VALUES(1);
SELECT * FROM test_function(1, @t);

When I run this, I get the same error as noted above. I'm running on version 10.50.4000.0, Developer Edition. (2008 R2 SP2)

The function above does just about nothing and has redundancies because I stripped the actual function down to the essential elements to cause the error. The essential elements are:

- One of the parameters is a table-valued parameter (the UDTT definition does not seem to matter)

- The SELECT statement has a CTE

- The TVP is accessed within the CTE

- The outer FROM clause references the CTE

- There is also a scalar parameter on the function (scalar type does not seem to matter).

- The scalar parameter precedes the TVP in the parameter list.

So I have an easy work-around: put the TVP first in the parameter list.