Comment 3 for bug 898797

Reproduced with Inkscape 0.48.2 and 0.48+devel r10754 on Mac OS X 10.5.8 (i386):

A - with attached sample file

B - new paths inside transformed groups (or layers):
1) draw two rectangles some distance apart and group them
2) move the group e.g. further down
3) enter the group (with 'Ctrl+Enter')
4) draw two paths (inside the moved group) and group them
5) apply path effect and bend

C - use preserved transforms (preferences)
1) change the preferences to always use preserved transforms
2) draw two paths and group them
3) apply path effect and bend

Workaround for A - add a new layer & work on the new layer, or the same as B
Workaround for B - nudge the new paths with the arrow keys (e.g. a step up and one down again) before grouping them
No workaround for C - (however, the default setting is 'Optimized transforms').

What triggered it in your example:
At some point the page had been resized, which added a 'transform' attribute to the top-level layer (that's normal and not a bug by itself). When new paths are created after having resized the document page, initially they have coordinates as shown in the GUI and a preserved 'transform' attribute to compensate the 'transform' of the parent layer. Once the new paths have been edited (nudge, group/ungroup, etc.), the explicit transformation is removed and optimized into the path data. After that, the path effect on the group works ok.