Tempdb Is Locked And Blocks Other Users

When I am running reports on SQL Server 6.5 database which involves creation of temp tables, whole tempdb is locked. All other users are blocked,

The reports involve queries which fetch data into temporary tables, as,

SELECT c1 , c2, c3 ...
INTO #tmp1
FROM T1
WHERE C1 = xxx
AND .........

When any of these queries are run, it blocks all other operations using TEMPDB, like creation of temporary tables or queries using sorts etc.

It appears that the query locks the system tables (sysobjects, syscolumns) in TEMPDB.

However, the above query works fine if it is constructed as,

CREATE TABLE #tmp1 (a1 ..., a2 ...., a3 ..... )

INSERT INTO #tmp1
SELECT (c1, c2, c3)
FROM T1
WHERE c1 = xxx
AND .........

Could someone please tell me what actually is happening in the first scenario. Is there a way avoid the blocking of TEMPDB usage other than the workaround mentioned above (which means I have to change all my queries) ?

Thanks
Nishant