8.3/8.4 SQL incompatibility?

A generated query of ours broke on upgrade from PG 8.3.3 to 8.4.1 with
the following error:
ERROR: failed to find conversion function from unknown to character varying
SQL state: XX000

I've narrowed it down to sub-selects in union clauses, as in the test
script below, which runs successfully on 8.3.3, but fails on 8.4.1. To
reproduce:
CREATE TABLE temp.TestTable
(
TestColumn VARCHAR(20)
);

(SELECT A.TestColumn FROM (SELECT 'TestValue' AS TestColumn FROM
temp.TestTable) A)
UNION
(SELECT B.TestColumn FROM (SELECT TestColumn FROM temp.TestTable) B);

Adding an explicit VARCHAR cast to the 'TestValue' string literal fixes
the issue.

This is nearly identical to
http://archives.postgresql.org/pgsql-hackers/2009-06/msg01356.php, but
Tom's reply there says that query hasn't worked since 7.1, while my
query worked in 8.3.3. Can anyone tell me if this is a known/expected
incompatibility, or if this is a bug?

Thanks,
Britt