Thank you for reprting this issue.  First I'd like to clarify what's going on:

$this is a very special variable.  In reality it's a combination of run-time variable and compile-time token.

Direct assignment to $this is resolved at compile time (as opposed to execution time for all other variables) and is disallowed using the error message you mentioned.

Creating a reference to $this is resolved at execution time as is any normal variable assignment (including assignment to a reference to $this).  While it is possible to perform a check to be sure that the variable being assigned to is not a reference to $this, that check would have to be performed for every single assignment.  This'll slow things down, let's put that in the 'minus' column.

Now, let's look at what indirectly reassigning $this does to the engine:

When an object property or method is accessed using $this->prop; or $this->meth();  The object indirection is resolved at compile time (this ultimately saves time during execution since the object's prop table  and virtual method table don't need to be repeatedly looked up at execution time).  This is why var_dump($this); can show the modified value (a string) while $this->prop; and $this->meth(); still work as though nothing's changed.  When the method in which $this was indirectly redefined ends however, $this is simply discarded to be "recreated" from the calling scope the next time a method is called.

Given the choice between: (A) doing nothing but leaving room for confusion, (B) taking away the ability to create references, or (C) checking assignments for references to $this(read: slow);  The current decision is to go with (A).

This may be revisited prior to the release of PHP 5.1, at which point there may be a fourth option which avoids the pitfalls of each of the three previously ennumerated routes, for the time being I'm flagging this report as 'Suspended'.

With regards to Polita's comments...

The compiler already checks for, and disallows, assignments in which $this is on the LHS at compile-time, e.g. $this = 0; $this =& $x;

Why not just have the compiler do a similar compile-time check on the RHS for references, i.e. <variable> =& $this; is detected at compiletime and causes a compiletime error? That should have minimal performance issues.