ADD: php 5.2.0 was downloaded from php.net as windows binary

Sorry, but your problem does not imply a bug in PHP itself.  For a
list of more appropriate places to ask for help using PHP, please
visit http://www.php.net/support.php as this bug system is not the
appropriate forum for asking support questions.  Due to the volume
of reports we can not explain in detail here why your report is not
a bug.  The support channels will be able to provide an explanation
for you.

Thank you for your interest in PHP.

I insist.
The parser does not give the expected result in the output.
http://www.php.net/support.php has nothing common with bug reports, this is just a help center

Recent research: in 5.0.4 this code works as expected:

sigh. lets see..

function modify(&$str1)
{

print "\n".'In function:'.$str1;
$str1='MOD';

}

// the variable $a is locally **defined** with value "IN"
modify($a='IN'); //this prints 'In function: IN' (as expected)

print "\n".$a; // $a is **already defined** as 'IN', hence it SHOULD print 'IN' **not** MOD

wth are you talking about ?? works as expected.

In php4 and php 5.0.4 it is: 
In function:IN
MOD

In php > 5.0.4 it works like you're saying
that's the question =)

Turn on error messages and see the error message you're missing:
"Strict Standards: Only variables should be passed by reference"

"$a='IN'" is not a variable, it's an expression and expressions cannot be passed by reference.
No bug here.

Okay, i'll note that from 5.0.4 php has silently changed its behavior...

Found another thing, in manual:
int socket_select ( array &read, array &write, array &except, int tv_sec [, int tv_usec] )

here's the amps before variables, that's exactly the same as spoken above.

And what we see next, in manual?

$num_changed_sockets = socket_select($read, $write = NULL, $except = NULL, 0);


so, the "bug" i'm complaining above is really strange...

Then it should be fixed in the docs.

This bug has been fixed in the documentation's XML sources. Since the
online and downloadable versions of the documentation need some time
to get updated, we would like to ask you to be a bit patient.

Thank you for the report, and for helping us make our documentation better.

Also fixed other occurrences of it:
socket_select
stream_select
readline_callback_handler_install