>I still suspect that's a bug in our sh, but the manpage
>doesn't say enough about backtick expansion, and i don't have any POSIX etc.
>standards around to verify the correct behaviour.

The shell has *always* expanded backtick text into separate arguments, and
it better keep doing so.  I just verified that it did so on 7th Edition UNIX
thanks to the PDP11 simulator mentioned on this list a while back; I'd have
verified it for V6, but V6 didn't have sed, my favorite test case.

Consider the common data-reduction case of having a bunch of files, some of
which you want to hand to a program based on whether they contain a string:

$ grep string2 `grep string1 f? | sed -e 's/:.*//'`

If backtick evaluated into a single argument word, that would obviously not
work.  I've been doing that since I started using 6th Edition, and I'd like 
to keep doing that.  ;-)