LMI:
Seems to be fixed. Very good to know. Do you know if the bootloader is fixed or what happened?
My understanding of the problem is:
a) The WDT reset does NOT disable the WDT. This means that if the bootloader doesn't explicitly disable WDT and the bootloader takes longer than the WDT interval to get to your setup() function the WDT will cause a reset loop.
b) The newer bootloaders detect the cause of a reset and either look for a download (Reset line pulled low) or go straight to your sketch (Power-on). If they treat the WDT reset as a Reset-line reset they would exacerbate issue 'a'.
I'm not sure if/when the bootloaders were changed but the 1.0 UNO bootloader works fine with a 1/4 second WDT.