After some investigation, I still don't understand what is going wrong here, but can report that after 2008-12-30, ABCL's SLIME definitely has the symptom that all output goes to the *inferior-lisp* buffer as opposed to the REPL bugger. And I should at least report what I have been able to determine more exactly about my confusion.
My main (mis)undestanding is that it seems as if the use of the WITH-CONNECTION macro is not properly binding *STANDARD-OUTPUT* to the output stream stored in the ENV field of the CONNECTION structure. Nor does the binding of the rest of the standard streams *ERROR-OUTPUT*, *DEBUG-IO*, *TERMINAL-IO* look correct. The code in CALL-WITH-CONNECTION, used by the WITH-CONNECTION macro reads:
(defun call-with-connection (connection function) (if (eq *emacs-connection* connection) (funcall function) (let ((*emacs-connection* connection) (*pending-slime-interrupts* '())) (without-slime-interrupts (with-swank-error-handler (*emacs-connection*) (with-io-redirection (*emacs-connection*) (call-with-debugger-hook #'swank-debugger-hook function)))))))
meaning that the WITH-IO-REDIRECTION macro will never be invoked if the REPL is being used as (eq *emacs-connection* connection)? This is the opposite of what I would expect from my understanding of what *emacs-connection* means.
But ECL seems to work with this code which is odd as ECL uses the same communication style (NIL) as ABCL, but ECL doesn't exhibit these sort of problems. I don't really undestand the intricacy of the closure that is made over the reader function created in the invocation of MAKE-REPL-INPUT-STREAM. The only difference in the code used by SLIME between ECL and ABCL is that ABCL doesn't use Gray streams (it doesn't really have them) as opposed to ECL, which does, in the MAKE-INPUT-STREAM/MAKE-OUTPUT-STREAM definitions. I can't think of what distinction might make, but I note it in case it strikes a chord with someone else.
The following function
(defun fix-standard-output (connection) (setf *standard-output* (cdr (find '*standard-output* (connection.env connection) :test #'equal :key #'car))))
when invoked on the REPL after SLIME starts via
CL-USER> (fix-standard-output swank::*emacs-connection*)
seems to restore the output behavior. Similar functions are probably needed for the other standard streams.
When I tried to bind *STANDARD-OUTPUT* to the value stored in CONNECTION.ENV at the same place *STANDARD-INPUT* is bound in SIMPLE-SERVE-REQUESTS, I get a stack overflow in the running of SWANK-LOADER.