Compiling following peace of code for an ARM processor (with optimization), produces wrong code.
This is true with gcc-3.0.4 and gcc-3.2

The file in the 'HowToRepeat' section produces :

root:~# gcc -O1 -v test.c
Reading specs from /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/specs
Configured with: ../gcc-3.2/configure --prefix=/usr/local/gcc-3.2 --with-cpu=xscale --enable-languages=c,c++
Thread model: posix
gcc version 3.2
 /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/cc1 -lang-c -v -D__GNUC__=3 -D__GNUC_MINOR__=2 -D__GNUC_PATCHLEVEL__=0 -D__GXX_ABI_VERSION=102 -Dunix -D__gnu_linux__ -Dlinux -D__ELF__ -D__unix__ -D__gnu_linux__ -D__linux__ -D__ELF__ -D__unix -D__linux -Asystem=unix -Asystem=posix -D__OPTIMIZE__ -D__STDC_HOSTED__=1 -Acpu=arm -Amachine=arm -D__ARM_ARCH_5TE__ -D__XSCALE__ -D__APCS_32__ -D__ARMEL__ -D__arm__ test.c -quiet -dumpbase test.c -O1 -version -o /tmp/cce7i9ST.s
GNU CPP version 3.2 (cpplib) (ARM GNU/Linux with ELF)
GNU C version 3.2 (armv5l-unknown-linux-gnu)
	compiled by GNU C version 3.0.4.
ignoring nonexistent directory "/usr/local/gcc-3.2/armv5l-unknown-linux-gnu/include"
#include "..." search starts here:
#include <...> search starts here:
 /usr/local/include
 /usr/local/gcc-3.2/include
 /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/include
 /usr/include
End of search list.
 as -o /tmp/cccJot3S.o /tmp/cce7i9ST.s
 /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/collect2 -dynamic-linker /lib/ld-linux.so.2 -X -m armelf_linux -p /usr/lib/crt1.o /usr/lib/crti.o /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/crtbegin.o -L/usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2 -L/usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/../../.. /tmp/cccJot3S.o -lgcc -lgcc_eh -lc -lgcc -lgcc_eh /usr/local/gcc-3.2/lib/gcc-lib/armv5l-unknown-linux-gnu/3.2/crtend.o /usr/lib/crtn.o
root:~# ./a.out       
expect 0 : 0
expect 1 : 1
expect 2 : 2
expect 3 : 3

root:~# gcc -O2 test.c
root:~# ./a.out
expect 0 : 0
expect 1 : 3
expect 2 : 0
expect 3 : 3


The problem appears to be a mixup of the condition codes set by 
a 'tst' and an 'ands', as the .s from the 'bar' function indicates :

bar:
@ args = 0, pretend = 0, frame = 0
@ frame_needed = 0, uses_anonymous_args = 0
@ link register save eliminated.
        cmp     r0, #1
@ lr needed for prologue
        mov     r0, #0  
        bxne    lr
        tst     r2, #3      **** Set CC
        ands    r0, r1, #3  **** Overrule CC
	movne	r0, #1
	orrne	r0, r0, #2  **** should use CC set by 'tst'
	bx	lr
.Lfe2:
	.size	bar,.Lfe2-bar
	.ident	"GCC: (GNU) 3.2"

Release:
gcc-3.2

Environment:
Linux xingu-07 2.4.16-rmk1-xng1 #38 Mon Jul 8 16:09:28 CEST 2002 armv5l unknown
host: armv5l-unknown-linux-gnu
build: armv5l-unknown-linux-gnu

How-To-Repeat:
/* reproduce with : */
/* gcc -O2 test.c */

#include <stdio.h>

int bar(int s,int motion_x, int motion_y);
int main(int argc, char* argv[])
{
  printf("expect %d : %d\n", 0, bar(1,0,0));
  printf("expect %d : %d\n", 1, bar(1,1,0));
  printf("expect %d : %d\n", 2, bar(1,0,1));
  printf("expect %d : %d\n", 3, bar(1,1,1));
}

int bar(int s,int motion_x, int motion_y)
{
  int dxy;
  
  dxy = 0;
  if (s == 1)  {
    if ((motion_x & 3) != 0) {
      dxy |= 1;
    }
    if ((motion_y & 3) != 0) {
      dxy |= 2;
    }
  } else {
  }  

   return dxy;
}