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This issue has been fixed at ArcSDE 9.3 Service Pack 1
The issue happens only when a file geodatabase is checked out, and when creation of overlapping ObjectIDs and the deletion of the same ObjectID happen during the same editing session.
This is a known issue.
Upgrade the installation with the latest service pack, if necessary.
The latest service packs and patches for ArcSDE can be found at: Patches and Service Packs for ArcSDE.