I added a remote repository (packman by ftp) as install source. I explicitely disabled the refresh for that repository. Now when I run sw_single it gives me an error if my network connection is down (as it is in many cases, as I'm using dial-up), saying that:
Cannot access installation media
20061116-230553 CD1
Check that server is accessible

The details are:
ftp://ftp2.lug.ro/packman/suse/10.
Curl error for: ftp://ftp2.lug.ro/packman/suse/10.1/repodata/repomd.xml: Error code: Connection failed Error message: Couldn't resolve host 'ftp2.lug.ro' 

Choices are OK, Abort, Skip. If I select skip, I get a warning:
There was an error in installation source initialization.

ftp://ftp2.lug.ro/packman/suse/10.1/: Cannot create the installation source

After this the Initializing screen is visible for a few seconds and I hear the DVD drive (containing the Beta2 DVD) spinning up, and I end up with an empty yast window, without texts or buttons on it. The only solution is to kill the y2base process. 

Now if I run inst_source, it tries to download the same file, it fails, and it removes the packman repository from the available sources. If I run inst_source with the network up, it refreshes the repository from the net...
Of course, as I stated refresh is OFF for this repo.

IIRC this worked correctly with Beta1.

Just a note: if I add the repository, bring down the network and start sw_single it works for the first time, but if I start it some time later, it shows the bug.