coreutils-8.16 works fine (confirmed), and i don't recall seeing this bug 
before, so looks like a regression with 8.17

easy to show:
$ sudo ln -s dev /foo
$ ls --color=auto /
... foo wrongly shows up in blinky text indicating it's a broken symlink ...
$ ls --color=auto /.
... foo correctly shows up with normal coloring indicating it's a symlink ...
$ cd / ; ls --color=auto
... foo correctly shows up with normal coloring indicating it's a symlink ...
-mike