Is there anybody out there that can triple check this behavior ? Im running Windows XP. Here's a copy-paste log of what I see on my system. It aint perfect but it does enter the UDF:

C:\>kix32 test /d

break on
$var = 2
$new = Echo($var)
select
$Echo = 2
case $var = 3 $Echo = 3
?"newvar=" $new
"newvar=" $new
$new
exit 1

-Shawn